How to Buy a Car with Bad Credit

Thousands of people have bad credit marring their reputation and present financial states. Bad credit means having credit card defaults, bankruptcy and repossession in your past history. Having bad credit makes it slightly more difficult to buy a car while at the same time getting a good deal for it.

Why is this?

It’s because the loan you take to buy a car will have a much higher interest rate than someone with good credit. And if the car dealer you are buying from gets wind of the fact that you have bad credit you might get taken advantage of. Look out for the clever salesman trying to squeeze more money out of you by citing additional finance costs, warranties and insurances.

You shouldn’t get sucked into this trap; you should always know that the dealer needs your money as much as you need the car and that you can easily walk away and find the same deal elsewhere.

Credit Check

You should first check how bad your credit really is, which means getting a credit score checked by a bank, preferable by a few banks. With a credit score, you know exactly where you stand and the dealer cannot assume that your credit is any worse than it really is which means he or she cannot trick you into paying more for the wrong deal.

Financing

If you cannot find a bank that is ready to lend a loan on bad credit, you can always go the dealer to help finance you a car.

Many dealers have tie-ups with financial companies that do give loans on bad credit, high interest loans, but loans nevertheless. You should be very careful about the exact details of the loan, however, since you cannot afford to get a bad deal.

If your credit improves and you have paid some (say six months worth) of the installments on time, some banks even allow for you to switch the bad credit loan to a loan with reasonable rates.

In fact, some lenders who turned you down initially might also reconsider at this step, once they have credible proof of the fact that you are reliable when it comes to your car payments.

Be aware of

You should be careful to get all the paperwork done about the selling of the car, the insurance rates, etc.

You should not get duped into settling for an incomplete deal where you can be called back with your new car and have a higher interest rate forced on you.

You should try to get a discount on the down payment and use the money you saved to get the car insured, registered and legally set for driving.

If you have bad credit you will need to be extra careful when buying.

Photo Credits: JLaw45

This post involves:

bad credit loan, bankruptcy, banks, car dealer, car payments, credit card defaults, credit check, credit score, finance costs, high interest loans, installments, interest rate, lenders, repossession, reputation, six months, warranties

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Buying and Selling, Car Tips

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