The experience at a dealership and the process of buying your new car at the best price and time of the year to secure the deal you want.
The pleasure rate also falls even more for customers with bad credit, while the stress level tends to rise. Instead of finding the right vehicle, the focus could easily be on getting approved for a loan. Nonetheless, as with most things in life, when you start with a plan, buying a bad credit car can be a simpler, less stressful process. To help you get back on track, we've put together four quick steps.
Look For Dealers With Flexible Credit Requirements
If you have bad credit, finding a lender will be the hardest part of buying a car— if you need to finance it. For most lenders bad credit is a red flag, signaling a high level of potential risk. Dealers providing in-house financing often tend to have the most flexible credit requirements, usually due to having a vested interest in selling the car, not just funding it. Using an online dealer network like our expert-rated options below is one of the easiest ways to find local dealers with flexible requirements.
A key point to understand about online dealer networks is that there is no role in the loan process in the network platform itself. The network essentially links you to the partners that best fit your qualifications.
You will be contacted by a dealer representative when you pick a dealer partner. There is no further role for the online network in the process. Alternatively, to pick a car and complete the loan process, you must consult with your preferred dealer. While you will generally need to find a specific car before qualifying for a standard direct auto loan, using dealer financing means you will first choose the specific dealer. You will then pick a car that fits your needs (and your budget) from the inventory of the dealer.
Select A Car Within Your Budget
Another important step in the buying of a bad credit car is to establish and commit to a reasonable purchasing plan. Cutting out of your plan a car loan with a monthly payment is a surefire way to set yourself up to fall back and cause further credit harm.
Make careful to include all the factors in your equations before crunching the numbers. The vehicle's sticker price is not the only cost factor; interest charges will be paid for the lease, and most car purchases will also include sales tax, title and registration fees.
The amount of your monthly payment depends on the total loan size the interest rate it charges and the length of the loan term. Longer loans would typically mean lower monthly payments, but due to the additional interest charges will have a higher overall rate, as shown in the following table.
There is a variety of plug-and-play auto loan calculators available online if math is not your strong suit. By encouraging you to adjust the loan amount and terms for the best fit, they can help you determine the maximum purchase price which fits your budget. The best calculators will also allow you to include additional fees to show you a complete picture, such as registration fees and sales tax.
Trade-In A Vehicle or Put A Downpayment
Not only is it important to set a car-buying budget to prevent unmanageable debt — debt that is likely to cause more credit damage— but the amount you're going to borrow is also a big factor in whether you're going to be approved for the loan
Asking for a loan that the lender thinks is beyond the means of repayment could cause you to be rejected for the loan. In these situations, you can sometimes improve your chances of acceptance by actually reducing the amount you ask for.
If you don't want to reduce the overall budget for a vehicle or can't qualify for a loan that's large enough to cover the purchase price, then you'll need to make a cash down payment and swap in another vehicle to make up the difference.
It may be better to make a down payment, depending on your situation, than to invest in an older vehicle. Although investing in a car is often easier than making a down payment, the price you'll get for a trade is not as good as you might get by selling the vehicle outright.
Paying Your Loan On Time
You'll be able to drive off the lot with your new car once you've found a dealer picked a vehicle, and signed your loan agreement. But don't think there's an end to the loan process.
If anything, what you do after you get an auto loan is just as important, if not more, than the first steps that lead to it. That's because your new auto loan can be a powerful tool to repair your bad credit if done carefully.
And it all ends by ensuring that you make full and timely payments every month. More than a third of your FICO credit score calculations are accounted for by your payment history, making it the single biggest factor in your credit rating.
As a result the overall credit profile can be ruined by even a single late fee. But don't worry if you're a day or two late; deposits must be made at least 30 days before being registered as overdue to the offices.
Setting up automatic payments through your bank account is a simple way to make sure you're always on schedule. You may pick the payment date — ideally at least two days before the due date — and the cash is transferred automatically each month.
While the ability to digitally search through online auto sites has taken some of the legwork from finding a new vehicle, the process usually remains to be about as much fun as a dental visit— especially if you have bad credit.
You can at least make it a smoother ride with proper planning, however, if not a more fun one. Not only can you get back on the road after the right steps, but it can also help you restore your credit score.