How To Lower My Monthly Payment On My Car If I Have Bad Credit?

If you are reading this article you probably already have car loan with a financial institution

, you may feel like you are over paying for your car loan and looking for ways to reduce your monthly expenses. Before we go any further let's look at the situation as a whole. When your credit score falls below 640 you are automatically considered to be a bad credit applicant, and you will automatically receive a higher interest payment because of that. But unknown too many people, there are few ways you can cut your monthly spending on your car. If you have consistently made your payments on time, your credit score may have recovered enough for you to apply for a normal car loan. Pull a credit report on yourself, and keep track of your credit recovery. If you are confident you have made your payment for the past 12 months on time and you may just qualify for a lower interest loan. In that scenario you will have to break your current financial obligation first, take your vehicle into another dealer, trade the vehicle in against a newer car. If your deal is approved, you will most likely be paying for a much newer car at a much lower price. If you are declined after your credit application, it is crucial for you not to apply to any other dealerships. Each submission will lower your credit score, and there is no need for you to lose out on your credit if you know you wouldn't be approved anyways.

Another way to cut down on your expenses is to re-negotiate your car loan with your existing dealer, if you have consistently been making your payment for the past 12 months. You have some negotiating power when it comes to refinancing your loan. Look for another vehicle with your dealer that is newer and priced well. Bring back your older car as a trade in against the newer vehicle, your dealer will be able to sell another car, and that is good enough as an incentive for them to reconsider your application with lowered interest rate. Ideally you should look for a vehicle that is not older than 5 years, and import brands will usually carry a higher resell value and better quality. So in a nut shell if your payment history is good for the past 12 months you maybe in a position to buy a newer vehicle with your selling dealer. Remember if there is an incentive for your dealer to move another car, they may just be willing to do that for you.

Contrary to popular believe a newer vehicle will typically carry a lower payment due to several reasons. For one the banks will be willing to finance a newer vehicle because that vehicle will have minimal chances of mechanical repairs therefore a better investment on their money. They can afford to offer you a lower interest rate since the vehicle will most likely last few more years, and therefore they can collect more money back in the form of the interest. An older vehicle has a much lower life span in the eyes of the lender; they will have to consolidate the loan into a 24 or 36 month terms, making your monthly payment considerably higher. The much higher interest incurs for the same reason, if the banks think the vehicle only has 2 to 3 years of investment value they will try to collect all they can on the interest before the opportunity run out. So the next time you are looking to lower your monthly payment, you should make sure you have met the minimal requirements before you take the plunge.

by: Rick Li

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