A Guide to Buying a Car with Bad Credit
One of the first financial lessons most individuals learn is the importance of good credit. Having a strong credit score opens the door to numerous benefits, including being able to obtain loans for life’s most valuable purchases. Good credit scores are especially an absolute must when applying for a car loan. When you have a stable job and an excellent credit score, it becomes quite simple to quickly get approved for a car loan with a great interest rate.
However, as you have probably figured out, life isn’t perfect. Bad things happen to even the most financially responsible individuals. Not everyone will have a perfect credit score when trying to buy a vehicle. Cars can (and will) break down when your funds are low and your credit is bad. You may currently be facing a situation where you need to purchase a car right away, but your credit is unsatisfactory. If this is the case, there are two main options available to help you quickly get the car you need.
Before Considering Your Options, Don't Panic!
The first (and arguably most important) step in buying a car with bad credit is to not panic. The idea of being denied a loan and going without a car for an extended period of time can lead you down a path of negative thoughts. Stop those thoughts immediately! These worries won’t help your situation, and will only make you feel miserable. Take a moment to relax, refocus, and to begin concentrating on the plentiful solutions available to you.
Buying a Car in Cash
If your credit score is low, but your savings account is high, you don’t have to depend on a good credit score. Instead, consider using your savings to pay cash for a vehicle. Although depleting your savings is an understandably discouraging scenario, it will completely eliminate the need for a credit check. Your bad credit score no longer has the power to harm any part of the car buying process when paying for the vehicle without a loan.
In order to get the best price on a new-to-you vehicle, come to the dealership prepared. Before looking at cars in person, research the top ways to negotiate the best price for your ideal vehicle. Research the car makes and models that you are considering purchasing, and look up the prices for each vehicle. Your research efforts are especially important if you are working with minimal funds. Your ability to negotiate could mean the difference between no vehicle and drive home with a fully paid-off car.
Don’t quite have enough funds saved to buy a car in cash? If you are able to get by without a car temporarily, you can save up extra cash while using alternative transportation. This is especially helpful if you have some money saved, but not enough to purchase a vehicle. Start taking public transportation, using app-based car services (e.g. Uber), carpooling, or using a bicycle. Depending on the nature of your commute, the use of alternative transportation options can provide you with a few months to 1+ year of time to save for a car.
Bad Credit Auto Loans
Short on cash and have bad credit? While your situation may leave you feeling discouraged, there are still plenty of options available. Most people do not have the supply of cash needed to pay for a car in full, so getting a loan is a must. Thankfully, there are a large number of lenders offering car loans to individuals with bad credit.
As you review your options for potential lenders, you will notice that there are some notable differences between standard loans and bad credit auto loans. Many bad credit car loans place restrictions on the age and mileage of the vehicle being purchased (cars must usually be less than 10-12 years old, and have less than 100K to 120K miles). Additionally, your interest rate will likely be significantly higher than the interest rates offered to those with good credit.
One obvious benefit to bad credit car loans is the lenient credit score requirements. Although credit score requirements vary from lender to lender, there are options for just about everyone. Some lenders require a low minimum credit score, while others work with individuals who have no credit history, or who have gone through bankruptcy.
Additionally, almost all bad credit car loans have minimum income requirements. You can expect lenders to request proof of income between $1,500 per month and $1,800 per month. Down payment options are variable depending on the lender and your current financial situation. In most cases, your down payment will be relatively minimal (between $500-$1000). There are even a few lenders that regularly waive the requirement for a down payment altogether.
Not sure where to start your research? There are quite a few loan choices available, so be sure to take your time when considering which one will work best for you. Research the Best Bad Credit Auto Loans for 2017 to help you decide which options work best for your individual situation. This will give you an idea of all of the best selections when looking for a high-quality bad credit loan.
Although you may have to get a little creative, buying a car with bad credit is 100% possible. From using any savings you might have, to applying for a bad credit car loan, you can get a car when you need it with minimal impact on your day-to-day living.
The top takeaway from all of the information you have just read should be the importance of research. Your life situation is unique to you, so it is essential to consider which options match best with your circumstances. Research car types, bad credit loan offerings, and tactics for negotiating the best price possible at the dealership. Spending even a minimal amount of time analyzing your options will make the car buying process even more smooth. With a bit of persistence, diligence, and flexibility, you will rapidly be on your way to owning a new-to-you vehicle.