Overcome the Challenge of Bad Credit & Purchase a Car
A poor credit rating can cause many challenges, particularly when you want to buy a new car. When your credit score is impacting your ability to get approved for a loan, you will want to learn the best ways to fight that problem. A poor credit rating does not necessarily mean you cannot qualify for a loan; it means that you need to take steps to ensure a lender is willing to work with your situation.
Obtain a Credit Report
Never assume you are not qualified for the loan just because the numbers are not perfect. According to BankRate.com, you should obtain a copy of your credit report and look over it before you look into car loan options.
Review your credit report and look for any mistakes, errors or problems that require a little work. If you see that information is incorrectly reported, send a formal letter to the creditor and to the credit bureau to investigate the situation. If you send a letter, provide proof that the data is wrong. To further repair your credit, send a goodwill letter asking for creditors to extract negatives on your credit report.
Obtaining a credit report will provide you with the opportunity to spot inaccurate data and recognize where you might improve your current habits to improve the situation. It will also give you an idea of what your lender will see before you apply for a loan.
Save a Down Payment
The down payment is a requirement for many lenders, but the amount will vary based on the loan you require and the price of the vehicle.
According to FreeCreditScore.com, a larger down payment than the minimum will make you look better in the eyes of a potential lender. The amount of risk involved is reduced. If you can save enough to pay almost half of the loan, then the lender will feel confident that you have the ability and the interest in repaying the full amount of the loan.
Depending on the lender and your situation, the amount you are able to save will vary. As a general rule, you should save almost 20 percent of the price of the vehicle or more to show that you are serious about the purchase.
Compare Lenders & Buying Used
Obtain a quote and compare lenders before you make a final decision on a loan. Depending on your credit score, report history and current situation, lenders will offer you different terms.
According to DMV.org, many financial institutions are willing to work with you, even if your credit score is imperfect or you do not yet have any credit. You can look at banks, credit unions or bad credit auto loans at DriveTime to find the perfect option.
Buying a used car is a great option if you have limited funds. Used cars have already depreciated, so you will not pay as much for the vehicle. Lenders are willing to take the risk on a loan because the amount you require is less. After you obtain a loan, you will still have the option to make improvements later. According to DMV.org, you can apply to refinance if you are not happy with your first loan.
A bad credit score does not necessarily mean you have no options. It is possible to obtain an auto loan when you are ready to buy a new car, but it will take a little comparison shopping and planning to get the best rates.
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Category: Car Purchase
