Bad credit is generally defined as a credit score in the low 600’s, specifically at or under 629. There are many reasons that can contribute to low credit, but the bottom line is that if you don’t have a good credit score, it can be difficult to purchase the items you need. You may need a car now, which means you don’t have the time necessary to build your credit score. Here’s what you should know about buying a car when you have bad credit.
Know Where You Can Get Auto Loans
There are several places to shop around for car loans even with bad credit. According to Consumer Affairs, banks, credit unions, dealerships and finance companies may offer a loan even if you have bad credit. Companies like AutoStart also offer car loans for people with bad credit. Gather all of the information you can from these places so that you can make an informed decision.
Make as Big of a Down Payment as Possible
One of the best things you can do if you’re purchasing a car when you have bad credit is make a big down payment. First of all, your credit history and score will limit the amount you can get from a loan, so you’ll need to pay as much on your own as possible to start with. A large down payment can offset the taxes, fees and interest you’ll have to pay on the loan, while at the same time giving you a larger selection of cars to choose from.
Try to Get Pre-Approved for a Loan
Instead of finding the car you want and then trying to get approved for a loan that will help cover the cost, get pre-approved for a car loan first. That way, you’ll know exactly how much money you have to work with when you start car shopping. You’ll also get the pre-approval process out of the way so that you don’t have to go through all of those steps once you are ready to make a firm decision on a car.
The most important part of purchasing a car when you have bad credit is doing the research. There are a lot of scams out there that you should avoid. While you won’t be able to get a great interest rate or huge loan amount if you have bad credit, you can still make smart financial decisions. Done correctly at affordably, your car loan may even help improve your credit score down the road.
