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Can I Get a Car Loan With Poor Credit?

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Can I Get a Car Loan With Poor Credit?

Did you know that an estimated 108 million people in the United States of America have a low or non-existent credit score?

Having poor credit makes purchasing a vehicle or a home much trickier, but it isn’t the end of the road and there is still plenty of hope.

Many people need to borrow money in order to purchase a new car, but lenders are willing to work out deals whether you have poor credit or not.

Exploring your financing options is a big step in the right direction, but there are other things that you can do to improve your odds of getting approved for financing for your new vehicle.

The good news is that you’ve found the perfect guide to learn all about your borrowing options.

Keep reading this article to learn more today!

Know Your Credit Score

One of the biggest keys to getting a loan from your borrowing options with poor credit is to know your credit score ahead of time.

Many lenders use the FICO credit score system, which rates your credit on a scale between 350 and 850, with 850 being pristine credit.

Anything below 580 is considered to be low credit to most lenders.

The main things that impact your credit score are the amount of money that you owe to creditors, the length of your credit history, and your history of making payments on the things that you owe.

Making payments in a timely manner is one of the most effective ways to improve your credit score prior to taking steps to buy a vehicle.

Avoid making any large purchases ahead of your new car purchase.

You should also avoid spending more than you can afford with your credit card to improve the odds of getting approval from your financing options.

Improvements to your credit score will help you get the best car loans rates.

Save for a Down Payment

Having poor credit could put you in a situation where you need to have more money available to make a down payment on the vehicle that you want.

The lower your credit score is the higher your down payment will need to be. A larger down payment minimizes the risk that your borrowing options see when they check your credit score.

It’s also smart to put more money down on your new vehicle since it will decrease the amount of money that you’re spending on interest.

Expect to face higher interest rates if you have poor credit.

It is one way that your financing options feel they can decrease the risk of letting you borrow money for your new ride.

A good rule of thumb is to use a down payment of 20 percent when you buy a vehicle. If that is more than you’d like to spend then the best approach is to pay what you can afford.

Do Your Research

Doing your research will make it much easier for you to find the best financing options when the time comes to buy a vehicle.

Doing your own research is effective because it will keep you from getting caught off-guard by the terms of the loan.

It’s a good idea to look at your budget to have a better idea of how much money you can afford to spend each month on car payments.

Shop Around for the Best Financing Options

You will have no shortage of options that you can look into if you’re looking for financing options.

One of the best options to explore if you have poor credit is a local bank or credit union.

If you have an existing account and relationship with that bank or credit union then it will be much easier to get approved for a car loan.

You can even get a discounted rate if you go with a local credit union or bank. It’s the best option to explore first if you’re worried about your poor credit score.

Online lenders are another great option since you can take steps to get prequalification from the comfort of your own home.

This process will give you more insight into what you can expect to pay each month for the car that you want.

It’s a great way to save you the damage of a hard credit check while still getting a better picture of your financing options.

Car dealerships also offer you ways to borrow money in order to purchase a new vehicle.

The finance manager will send your credit information to different lenders to find out if they are willing to help you finance your car.

Expect the dealership to mark up the rate on your loan if this is the path that you choose to take.

Avoid Subprime Lenders

Subprime lenders are dangerous because they look for opportunities to prey on people that want to purchase a car but have poor credit.

They try to make the process of buying a vehicle seem easy and stress-free, but in reality, you’ll get hit with interest rates that are through the roof.

The high interest rates will make it close to impossible to continue making payments on your new car.

This could put you in a hole that results in damage to your credit score and having your car repossessed.

As tempting as it might seem to go with this option with a poor credit score, you’re much better off exploring online lenders and local banks.

You will save yourself thousands of dollars by taking those extra steps instead of falling into the trap of a subprime lender.

Stop Letting Poor Credit Keep You Down

Poor credit is an obstacle when you’re ready to buy a vehicle, but there are things that you can do in order to make that new vehicle your own.

Avoid using subprime lenders as they’ll look to take advantage of you with crazy interest rates.

Look at using financing options like local banks and credit unions, and take steps to improve your credit score prior to shopping for a new vehicle.

Check out the rest of our blog if you’re seeking more encouraging and informative content like this!

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