Getting approved for a car loan is very important, especially if you have a history of late payments and high debt. Bad credit is a factor that affects the interest rate you pay on your loan.
Although bad credit doesn’t prevent you from getting a car loan, it’s essential to shop around and prepare for a higher cost. According to Lantern by SoFi, you should “Compare auto refinancing rates from top lenders.” This will help you get the best deal possible. Below are some tips to help you find a good deal on a new car with bad credit.
- Review Credit Report Before Shopping
Even if you’re not planning on buying a new car shortly, it’s still important to check your credit report before applying for a loan. Doing so will help improve your chances of getting approved by fixing any mistakes you find. It is equally important to check your credit beforehand for people who think of completing an auto loan refinance with Lantern instead of obtaining a new loan.
- Don’t Take Credit Risks Leading Up To Loan Application
Before applying for a car loan, make sure that you pay all your debts on time. This will help avoid getting into trouble with the auto lender. For example, some of the red flags that an auto lender will look for are late rent payments, tax liens and bankruptcy.
- Check Loan Rates for Bad Credit Beforehand
You can check the latest average loan rates online. This will help you understand what type of loan rate you should expect. For example, you might pay more than the average rate for people with better credit ratings with bad credit. Your monthly payment will also affect the price of the car you’re planning on buying.
- Come Up With a Bigger Down Payment
Aside from your credit history, a high-interest rate will also limit the amount of money you can borrow. For example, a more significant down payment can help you avoid paying higher fees and taxes.
- Determine What Payments You Can Afford
It’s essential to determine how much money you can afford to pay each month. After calculating your budget, stick to a payment amount no more extensive than what is left over after paying all of your bills.
- Obtain Pre-Approval
Before you shop for a new car, talk to your bank or credit union to see if they have a pre-approval process. This will help you compare the available deals and find the one that fits your situation and budget.
- Forego the Extras
If you have bad credit, you may not be able to get approved for a low-interest loan. This means that you may have to give up some of the features you want in your new car.
- Be Wary of Buy Here, Pay Here Car Lots
These car lots are known to offer on-site financing with no credit check. However, they are also known to sell poor-quality vehicles and take advantage of their customers. These types of car dealerships should be a last resort.
- Thoroughly Read All Loan Paperwork
Getting used to the terms of a loan can be a bit overwhelming, especially if you’re not familiar with the agreement’s details. Before you drive off the lot, ensure that the documents align with what the dealer has agreed to. For example, some dealers will let you drive away without signing the documents. They then call you back to sign the significantly different documents from what they originally agreed to.
Unfortunately, people with bad credit are often the victims of predatory loans. These loans can cost the car buyer a lot of money and tarnish their credit report. So it is possible to buy an excellent car with bad credit. Take your time and thoroughly research the details of any deal before signing.
