No matter how you look at it, shouldering bad credit can ruin most of your chances to apply for a loan or a mortgage. Having a credit score of below 600 gives the impression that you are a delinquent payer, even when you always pay your debts in full and on time. This is because the very formula of computing your credit score heavily relies on not only your payment history, but also on how many credits you have and how much you utilize all of them.
Therefore, bad credit auto financing is trending in the industry. It only makes sense for these companies to be very lenient to clients with bad credit scores, since they can still give very good business.
Yet even then, most assume that they can only get approved for used cars. They consider a brand-new car out of the question for those with bad credit. Fortunately, this isn’t always the case.
It is understandable when car dealers try to raise your interest rates by outrageous amounts when you have poor credit. After all, a low score is usually taken as having a high potential of not being able to keep up with monthly payments.
The best thing to do when trying to apply for a car loan is to rebuild your credit. The fastest way to do this is to open credit accounts and master the art of paying on time. This way, you’ll repair and build up your current credit score. By doing so, you are demonstrating that you are sincere about keeping up with payments and financially capable.
While it makes sense to buy older, used cars because they are generally cheaper (and thus easier to make monthly payments for), it is much smarter to buy a brand-new car with your new loan. Newer cars carry more monetary value than older models, which tend to depreciate in value over time. From an auto-financing perspective, the new car poses perfect collateral for your loan. Plus, lenders are more than assured that you’ll be able to make the payments, since you don’t have to worry about costly repairs as you would with a used car.
However, this does not mean that you have to solely depend on auto-financing to buy your brand-new car. You have to do your part and work hard to be able to make the monthly installments. In this vein, it helps to save enough money to make a substantial down payment on your new car. Remember, the more you can pay upfront, the less you will have to shell out in your monthly payments.
How to buy a car with bad credit, ConsumerAffairs.com
12 Tips for Buying a Car With Bad Credit, TheBalance.com