January 15th, 2021 | Updated on June 3rd, 2021
Cars are the ultimate expression of personal freedom. They provide the means to reach the destination of choice and are ready to do so at a whim.
Even cities today are designed around cars, making them an inevitable accessory for everyday life there.
Rural settings can place even more demand on car ownership, as public transport options are few and far between. However, cars don’t come cheap these days, making second-hand ones a good alternative.
A good credit score is needed to buy even second-hand models. In case you don’t have it, you can learn how to buy a used car with bad credit. That way, you will have the ride you need without breaking the bank or lowering your credit score further.
Getting A Good Deal with Bad Credit
Many factors influence the credit score of a person when they make large purchases like cars. Once you recognize these, you’ll know how to buy a used car with bad credit too. Keep these in mind before heading out to make that purchase.
Tame Your Expectations
It is normal to expect some nice things to have in your car. Features like incredible performance, good-sounding music system, fancy gadgets, etc., are the norm today. But they will increase costs and lower your credit score further.
Your expectations must match your budget. You must base your purchase on the amount left over after paying your monthly bills. Anything exceeding that will cause trouble to your credit score and overall finances.
Research the market for models that will give you the best value for your money. Only go for extra bells and whistles if you have something leftover.
Pay Higher Upfront
Any financing program for a car will include you paying an upfront lump sum to the dealer. Pay a high amount to reduce your loan amount and the damage done to your credit score.
This measure also helps reduce the interest you’ll have to pay, bettering your finances in the long term as well. Save to the maximum extent possible to pay a large upfront sum for the car.
Get a Pre-Approved Loan
A pre-approved loan is where you are granted a loan for a certain amount before making the actual purchase. This approach leaves you with two advantages:
- It will protect against your impulse to overspend.
- It will give you better leverage while negotiating for a lower price.
- The dealer will also be assured of payment, making the effect of your bad credit score much less substantial. Sometimes, the dealer can introduce you to such credit lenders.
Get To Know Present Interest Rates
Auto loan interest rates are varying continuously; they also change based on lender and location. Learn of these to get an idea of the average rate. Compare the rate offered against this average to know your situation.
Good credit scores lead to average or below average rates. Bad ones, on the other hand, can increase them. Expect to pay higher than average due to your bad credit score.
Be careful not to accept rates that go as high as double the average. This factor is pertinent as it will affect the final price of the car too.
Improve Credit Score Beforehand
Prevention is always better than cure, so increase your credit score in every way possible before going for the purchase. Go through your credit report and see all the factors that you can change to realize this.
Credit card dues cause the most significant dent for most people. Reduce them to any extent possible to lead with a good impression. Solve any pending disputes as well to improve the score.
Avoid making purchases that will harm your score further. You must be fiscally very disciplined in the months before making your car purchase. Common red-flags include late rent payments, bankruptcy, tax dues, lawsuits, charge-offs, and debt collections.
Beware Of Scams
The last thing you want with your bad credit score is getting trapped in a scam. It’ll drain your finances further and leave you with a damaged product.
“Buy Here, Pay Here” lots will give you credit with minimal or no checks. However, the interests will be very high, and/or your vehicle will be of terrible quality. You may end up paying more for further repairs, damaging your score further.
Go through the paperwork and hammer out the details with the dealer. Talk to the lender as well and read the fine print before signing on the paper.
If you know how to buy a used car with bad credit by taking adequate precautions, you’ll ride into the sunset keeping your credit score damage low.