subject: Tips How to Buy a Car, Bad Credit, Loans [print this page] Tips How to Buy a Car, Bad Credit, Loans Tips How to Buy a Car, Bad Credit, Loans
So you're ready to invest in a new car. But what if you're hoping to buy car bad credit? Don't worry. It may still be possible to get the car of your dreams, but you will face obstacles that those with better credit will not. Understanding these obstacles before you run into them will help you overcome them and bring your new car within reach.
First, you should know just how your credit came to be considered "bad." There are several factors that could lower your credit score to an undesirable level. For example, making payments late, or not at all, will hurt your credit score. So will defaulting on a loan and filing for bankruptcy. Bankruptcy in particular can do serious damage to a credit score and should be avoided if at all possible.
Credit cards are another pitfall when it comes to credit scores. Having a credit card and making the payments on time can help your score, but missing those payments will hurt your score. Maxing out credit cards or carrying high credit card balances, relative to your credit limit, could also hurt your score.
Once you know why your credit score is low, you should know what to do about it and what to expect from lenders. If your credit score is anywhere below 600, you should expect to pay higher interest rates than those with higher credit scores. The exact rate will vary depending on where you live, but typically people with credit scores between 500 and 600 can expect to pay 15 to 17 percent interest rates.
If possible, try to get your loan from a bank rather than a car dealer. Even if you have bad credit, the bank is more likely to give you a better deal than the car dealership. Some companies, such as Capitol One, Household Finance and AmeriCredit, are more likely to offer a loan to someone with bad credit. But even with these companies it is important to do your research and make sure they don't take advantage of customers with low credit scores.
If getting a loan from the bank is not possible, you can get financing from the car dealership itself, who has more flexibility than banks in terms of whom they can give financing to. But you have to be especially careful if you go this route, as dealers could try to overcharge you if you have bad credit.
Knowing what not to do in these situations can be as important as knowing what to do. Regardless of your credit score or source of financing, you want to make sure your deal is set in stone before you leave the car dealership. Verbal arrangements or financing that is incomplete could cause you problems down the road. If you drive away with a contract that is still "subject to final approval," you could get a nasty shock later when your dealer ups your rates.
Also watch out for all those tempting extras a dealer may offer you. Extra warranties and insurance may sound vitally important at the time, but they could end up costing you more than they're worth.
Overall, the most important thing is to know what you're being sold and your rights. Bad credit does not mean that you should get a bad deal. If you watch out for hidden fees and penalties, and avoid falling into financing traps, you can get a great vehicle even if your credit is less than perfect.
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