Buying a car with bad credit can seem like an impossible and overwhelming challenge to some. Car dealerships aren’t very up-front about their financing options and many dealerships don’t care about giving you the best deal — they want the one that makes them the most money. So how do you buy a car with bad credit without getting fleeced? Follow these tips and you should come out with a good deal.
How To Buy a Car with Bad Credit – The Four Things You Must Do
There are a lot of things that you can do to improve your chance at getting financing but there are only three that you absolutely MUST do if you have bad credit. They are:
- Know your exact credit score, as a change of a few points might make a big difference in financing
- Put the internet to work for you
- Work with a local bank to try to secure financing before going to a dealership
- Scrounge up as much cash as you can for a down payment
Here’s why these three items are so vital if you’re trying to buy a car with bad credit.
Know Your Exact Credit Score
The importance of knowing your exact credit score can’t be stressed enough because if you fall on the borderline of two credit score ranges, the rate you pay for a loan could differ drastically. The difference in finance rate for a person with a 585 credit score vs. a 595 score can be a full point in interest. That could result in thousands of dollars of additional expense over the life of a loan.
If you check your credit score (you can learn how to do it for free here), you’ll have a good idea if you can make some quick changes to jump into a better interest rate tier.
Here’s a breakdown of one of the most commonly used score groupings:
- 720 – 850
- 690 – 719
- 660 – 689
- 620 – 659
- 590 – 619
- 500 – 590
If you’re on the borderline of one of those groupings and you have any errors in your credit report, you could improve your score (and interest rate on your car loan) for free. Even if you don’t have errors in your report, you can improve your credit score quickly by using any one of a few proven tips.
This is the easiest (and fastest) way to save on your new car.
Get a Car Loan Online (From a Site Focused On Bad Credit Loans)
The internet has made a lot of things in life easier. Buying a car with bad credit is one of them. With access to more lenders, you increase the competition for your business. That means the banks have to offer lower rates to get you to pick them.
There are lots of websites that cater specifically to car buyers with bad credit — pick one (or more) and you might be surprised by what they return. Just fill out their online application, submit your information, and look at the offers they give you. Make sure you compare those to what you can get from local banks when you visit them as well.
Work with a Local Bank to Get Financing
Some local banks are willing to look at more than just your credit score when giving out loans. If you have bad credit but you just recently received a promotion and pay raise, changed to a higher paying job, or finished paying off some debt, they’ll factor that in. Also, if it’s a bank you have a long-standing relationship with where you’ve paid off other loans before, they’ll be more lenient.
The real benefit of working with a local bank is that you know before you go to the dealership what your financing situation is. There are no mysteries, and you have a better chance to shop around for a good rate. If you’re buying a car with bad credit and you don’t look at local lenders, you’re likely costing yourself thousands of dollars.
Put More Money Down
This is an answer a lot of people hate to hear, but it’s the single biggest thing you can do to increase the likelihood you’ll get approved for a loan. The more money you can put down, the less risk the lender assumes.
Often, people with bad credit will indicate that they don’t have much available money to put down towards a car. While understandable, there are some ways to make money quickly — either by selling personal items online, donating fluids (blood, plasma, eggs or sperm), or working a second job.
None of these methods are “magic bullets,” but if you put these three methods to work, you should be able to buy a car with bad credit.