If you have bad credit, you may assume that purchasing a new vehicle is out of the question. It’s not. Many lenders offer bad credit car loans to people with low credit scores. Though the rates are higher than traditional auto loans, they are ideal for individuals who need a reliable vehicle but who cannot spend months fixing their damaged credit score. With that said, there are three mistakes to avoid when financing a vehicle with bad credit:
Providing Wrong Information
Too many people over exaggerate their income and downplay their expenses to achieve better rates. Don’t do this. Dealerships are meticulous when it comes to checking a person’s information. They want documents verifying income, bank statements verifying expenditures and a list of references. If you somehow slip through the cracks, you’ll be stuck with a loan you can’t really afford, thereby risking your credit score even more.
Underestimating Your Creditworthiness
Don’t just assume that you have bad credit. If you’ve been working on building your credit through secured credit cards, you may have better credit than you though. Check your credit score before heading to the dealer. If you go in blind, they get to define your creditworthiness, and they might not be honest about the information they turn up. Get copies of your reports and research what others in your score range are qualifying for to avoid having a fast one pulled over on you.
Longer bad credit car loans might seem ideal because they come with lower monthly payments, but they may end up costing you more in the long run. If the vehicle’s total combined with the high-interest rates mean that you need to increase the term just to afford the payments, you cannot afford the car. At this point in your life, you don’t need a nice car—you just need a car to get you from point A to point B.
Bad credit car loans are a great option if you need transportation today and cannot wait until your credit score has been restored. However, be careful when working with bad credit lenders, and use the above advice to obtain the financing you can reasonably afford.