Buying a car is a major milestone in one’s life. All that research and planning may not lead to your new car however if you have bad credit. A low credit score can certainly affect your chances of obtaining an auto loan, but it doesn’t mean that buying a new car is impossible. Credit Now created this guide to help you buy a car even with a bad or low credit score.
Get your Credit Checked
Before you make any inquiries about a new car, understand your financing situation and get your credit checked first. It’s important not to make any assumptions on your actual score as this can affect your final interest rate. Your bank can easily provide you with a free credit report or get a free check with a trusted online resource. This simple step can show you exactly what factors are having the most impact on your score. A few factors that affect your score include your payment history, debt, new credit and the length of your credit history among others.
Improve your Credit Score
Although this may seem obvious at first, it’s one of the most straightforward ways to reduce your interest rates as well as increase the likelihood of purchasing a car. Mistakes can occur on your credit score report but if fixed, it can raise your score by a few crucial points. We recommend waiting a minimum of 30 days before you go car shopping to fix credit errors or improve your score. Even a few months of paying off bills and accounts on time is enough to raise your credit score enough to make a significant difference in your interest rates. Additionally, it should go without mentioning, during those 30 days don’t do anything that would add to your bad credit.
Look at a Pre-Approval on an Auto Loan
Getting a pre-approval for an auto loan can help reduce stress in the future. A bank or union would assess your financial information and give you an estimate on how much they would be willing to lend you. This should give you a better idea of what you can afford. This, however, is not a guaranteed loan, for more information on auto loans and what you need to apply for them, read our essential list.
Save More Money
In certain cases a bad credit score is no quick fix. If you are stuck with poor credit it is still possible to buy a car, though you are likely to face higher interest rates that vary between auto dealers in Vancouver. A high-interest rate is not the end of the world however, here are a few things you can do to save more money on car loans:
- Consider a shorter-term loan. Your monthly payments may be higher but in general, interest rates are lower for short-term loans leading you to pay less over time.
- Make a bigger down payment. This can counteract a high-interest rate, taxes and fees but also widen your available vehicle options.
- Make a budget and stick to it. A simple way to pay off your auto loan is to avoid any additional expenses, this includes any add-ons for your car. Remember, the quicker you can pay off the loan means less interest being charged overall.
- Get everything in writing. This will ensure that you know exactly what you’re paying for so no additional fees surprise you at the end of the month. One thing to consider is if there is a prepayment penalty embedded into the agreement – you might be fined for paying a loan quicker than agreed.
- Do your research. If you are looking at auto dealers in Vancouver that deal with bad credit, then be sure to look up the current average for interest rates. You may have low credit, but that doesn’t mean your loan rate should double the average.
Are You Looking to Get a Car With a Bad Credit?
Bad credit should not stop you from purchasing a car. With a smart, cohesive plan, you can set yourself up to make affordable monthly payments while driving the car you wanted, not settled for.