Bad Credit Auto Loans
Buying a car can be hard enough, but trying to find auto loans for bad credit is an entirely different story. If you add in the fact that you have bad credit it can become your worst nightmare. Even if you manage to find a good deal, shady dealerships try to pressure you into adding other services onto your already stressed pocketbook, sometimes tricking you into a monthly payment that you cannot afford.
If you are one of the many people with a low credit score your nightmare continues when you are told of the extremely higher interest rates you will have to pay. It’s easy to be less than optimistic when you feel that you will never get a good deal, but you do have power, even in this situation. Dealerships want money, that’s what they care about. Since you are the one holding the money, you have a bargaining chip. Although it’s very easy for you to forget this piece of information, you have the upper hand; you can walk away and find a better dealership. In this article, I will share with you what you need in order to prepare yourself for getting bad credit auto loans.
Bad Credit Auto Loans: Before You Visit the Dealership
It’s important to know how bad your credit is before visiting the dealership. If you know how bad your credit is before visiting the dealership, you will know what you are dealing with. Many times people go to the car lot, pick out their dream car, and then talk to a salesman about buying the car. When you have bad credit this is not the way to go, you have to prepare yourself ahead of time. This means you need to know your credit score before you ever set foot on a car lot, before you decide on a car, or ever talk to a salesperson. If you go in there not knowing these things you are just setting yourself up for a bad credit auto loan that is sure to put you further into the poor house.
First, arm yourself with the knowledge of your credit report. Request your credit report from the three leading credit bureaus, TransUnion, Experian, and Equifax. You get one free report each year, so use them to educate yourself in order to get the best possible auto loan.
Now that you have an idea of what your credit looks like, you need to review your FICO score as well. Just reviewing your credit history is not enough for you to get a good loan. You must learn what your FICO score is so car salespeople don’t take advantage of you. Your FICO score is determined by a very complex formula, but your number will be between 400 and 850. The higher the number, the higher your chance of getting a better deal. If you do not know your credit score you may think that what the dealer is offering is the best you can qualify for, even though they may be upping the interest rate on you just to get more money. When buying a car, do not depend on the dealership to have your best interests in mind. Always remember they are just trying to make money.
Bad Credit Auto Loans: How Bad Is Bad Credit?
Auto loans for people with bad credit are more common than you think and knowing your credit score will let you know if you have bad credit. A score of over 700 is golden, a score between 600 and 700 is considered okay credit, and a score below 600 is considered bad credit. If you have a score below 600, you can apply for subprime or very bad credit auto loans. This type of loan is expected to be the number one type of loan within a few years because of the damage the current economy is having on people.
If you have a low credit score, it is a good idea to do some repairs. Cleaning up your credit report is the fastest way to up your credit score and may be enough for you to qualify for a lower interest bad credit auto loan. Take a look at your credit score; do you have errors that show up? If so, you can have these items removed from your credit report. Do you have accounts that say they are delinquent, but are actually closed accounts? If so, you can challenge these items. Many people are afraid to even look at their credit report although nearly 80% of all credit reports have some sort of error on them. This process takes time, but it is well worth the work because lenders do not like to lend to people who are already behind on their payments.
Bad Credit Auto Loans: What Can You Afford Monthly?
Another important step you must take before visiting the dealership is to determine what you can comfortably pay each month. Many lenders offer auto loans for people with bad credit and It’s important to know what you can pay. This will help you avoid traps set by salespeople who may try convincing you to take on more than what you can afford each month just to make a sale.
The best way to determine what you can afford each month is by using an online auto loan calculator. There are many different types online. You should find one that calculates interest, car price, and the length of time you will be paying on your vehicle. Determining what you can pay each month, before deciding on a certain vehicle, will keep you from committing yourself to car that you cannot pay for and getting it repossessed later.
In closing, it’s very important to educate yourself and take precautions before you visit the dealership to buy a new vehicle or before you apply for bad credit auto refinance loans. Remember, if you have bad credit it’s even more important to stay between the boundaries of what you can afford in order to keep from damaging your credit further and possibly getting in over your head. Although you will pay higher interest rates, it is possible for you to get a decent rate and begin correcting your bad credit. Happy hunting.
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