11 Awesome Tips for Getting a ‘Good’ Bad Credit Auto Loan
Your credit history has a major role to play in getting an approval for an auto loan along with the interest rate you pay for funding your purchase. Sadly, purchasing a vehicle with bad credit is quite difficult, even if you are earning an income and has a stable job history. Having a history of high debt, delayed payments, repossession or bankruptcy is a sign to the lender that you are likely to default on your loan repayments and the lender will obviously prefer to avoid the messy process of repossessing your car.
Bad credit really shouldn’t stand in the way of your new precious possession, but for that you will need to shop a bit differently and be ready for a higher cost. Get the knowledge of the process as much as possible to avoid being taken undue advantage of.
1. Look for No Credit Check Lender
The first and foremost viable option for you is to find a no credit check lender, like David Dearman who is the biggest in house finance in the State of Mississippi and a reputable Buy Here Pay Here dealership serving Gulfport, MS and anywhere else in the 200-mile radius of Gulfport, MS. While seeking such a lender, your bad credit score won’t come in the way of getting your new set of wheels. David Dearman, e.g. has an internal scoring system to calculate down payments and credit score is just one of their 18 different criteria.
2. Go Through Your Credit before Starting the Shopping
Though you can get in house finance lenders like David Dearman, it’s a good idea to check your credit score and work on it. As soon as you start planning to purchase a new vehicle, start analyzing your credit report even if you have to do that many months in advance. By making your credit clean prior to applying for a loan, you can enhance your chances of being approved on good terms. The process of cleaning your credit will include disrupting credit report errors, paying off earlier due accounts and adding positive information to your credit report.
3. Avoid Further Bad Credit Items
During the months leading up to your loan application, take care to have the best behavior. This includes paying everything on time, not taking any other big credit obligation, such as new credit cards, etc. Potential red signals for a car loan lender include late payments, debt collections, tax liens, lawsuit judgments, bankruptcy and charge-offs.
4. Check Existing Interest Rates
Before purchasing a vehicle with bad credit, you should check online for the most recent average vehicle loan rates to better know what rate you have to expect. If you have a good credit, you would opt for a rate at or less than average, whereas with bad credit, you will typically have to face a higher rate of interest. Go through the no credit check loans too. However, if any loan rate is more than double the average, be skeptical about it.
The rate of interest of your loan will not only affect your monthly payment, but also the cost of the vehicle you buy.
5. Make a Larger Down Payment
The size of auto loan you can opt for will be limited by your credit history and a high rate of interest will make the size even smaller. In that case, a down payment can counterbalance taxes, interest and fees, and increase the range of cars you can select from.
6. Understand What You can Afford
You may have the temptation to overestimate what you can afford, so, you can imagine having a better vehicle. Think upon how much surplus money you are left with after paying bills every month. And that would be the amount you can afford. Go through your budget to check what you afford indeed to pay and then stick to that amount, even if you get an approval for a loan with larger payments.
7. Get a Pre-approval
Your shopping can be more realistic when you have a pre-approved loan amount to work with. Discuss with your credit union or bank about having a vehicle loan and know about the pre-approval process. If you are unable to get approved by your bank, you can contact an in house finance lender like David Dearman who are committed to help car buyers with bad credit.
8. Skip Extra Features
While purchasing a vehicle with bad credit, you may not be approved for a large amount of loan which may mean that you have to skip some of the features you desired. These may include premium speaker system, sunroof or leather seats that you may not expect while buying a vehicle with bad credit. As you already have a bigger loan payment due to the interest rate, you should not make it larger by adding features to your vehicle.
9. Check Your Non-profit Agencies
Prior to taking a pricey auto loan, just check if your state has any non-profit organizations that offer loans on vehicles to low-income consumers. It’s sad that not every state has such a program.
10. Read the Documents Carefully
Loan papers may be confusing. However, as your money and credit are at stake. Therefore it’s important to be careful to understand the terms and conditions of the loan. Ensure the documents match what the dealer orally agreed to. If you agree to the terms, before driving the car off the lot, sign the papers even if you’ve got a no credit check loan. Some devious dealers will allow you to drive away without signing and then will call you back to sign the documents with terms that are actually different from what you initially agreed to.
11. Be Careful of Scams
Consumers with bad credit are easy targets for innumerable types of scams. Take care not to fall prey to such predatory loans no matter how much you want a new vehicle. Not always but most of the times these loans prove to be poor for you and lead to yet another bad mark in your already blemished credit history. So, take your time, know all the facts and make the most sound financial decision as possible.
Visit an in house finance like David Dearman for a transparent and honest process of bad credit car loan and you can have a peace of mind while getting into your new car.