Can I Get a Car Loan if I Have Bad Credit?
A recent study found that almost 68 percent of Americans have destroyed their credit by age 30. That means that the majority of Americans have experienced unexpected expenses, a change in life events, or made financial decisions that cost them later. If you, too, have found yourself in this position, read on!
Working to repair poor credit presents a unique set of challenges, one of which is the ability to obtain a car loan. After all, a reliable method of transportation is pretty much non-negotiable these days. Additionally, most people can’t afford to pay for a vehicle in cash. For your average American consumer (good credit or not), a loan is usually the first point of entry when it comes to buying a new car. This can feel like a pretty formidable predicament if your credit is shot.
It’s Not All Bad News
While this situation seems daunting and possibly even hopeless, there is good news around the corner! Luckily, many dealerships offer a variety of bad credit car loans and financing options for your new ride. In fact, you’ll find that many of the bad credit used car loan options are much more flexible than can be found at a for-profit financial institution. These lenders tend to be a little more lenient and will get you on the road much quicker. That’s not to say poor credit doesn’t present some challenges, but it doesn’t have to destroy your ability to do the basics. Here are a few tips for securing the best loan possible, bad credit and all.
#1: Find Out Your Credit Score
While this may be stating the obvious, many people have never even seen their credit score. Even if you know that damage has been done, understanding the magnitude is a great first step. Many organizations offer free credit reports. Detailing out your credit report will help you pinpoint areas of focus. There may be certain pieces of your credit that can be fixed pretty quickly. Taking action in some of these areas will help you reap huge rewards and may land you on much stronger loan terms.
#2: Understand the Terminology
Many people get in a pickle when it comes to obtaining a car loan simply because they don’t take the time to become familiar with common loan terminology. You shouldn’t plead ignorance when it comes to the loan process; there’s a ton of good information available to help educate consumers. If you don’t take advantage of these resources, you may find yourself in an even more difficult scenario. Research key terms like “annual percentage rate,” “interest rate,” and “amortization.” For many consumers, this terminology is not commonplace, but speaking the lingo is extremely important when negotiating a dealership loan (especially bad credit car loans).
#3: Think Big Picture
When shopping for new wheels or a bad credit used car loan, it’s easy to get caught up in the monthly payment. In fact, the monthly obligation is where most people focus their time and energy. This is a huge mistake. Low monthly payments can be quite enticing, but they don’t always tell the full story. In fact, low payments often result in the consumer paying more than the car’s value over the life of the loan.
Instead, you’ll want to think “big picture” during the car buying process. Carefully review all the terms of the loan to ensure you’re getting the best value. Favorable terms generally include a low APR over a short timeframe. Keep that in your back pocket!
#4: Be on the Lookout for Scams!
Sadly, scams are a common part of the car sales process, especially for bad credit car loans. Researching common car scams will help you keep a keen eye open and avoid any pressure-filled slip-ups! Here are some common scams to watch out for.
Packed Payments. With this scam, the dealership increases monthly payments by an amount that may not seem like much at first glance, but it can stack up over time. You’ll probably see line items like extended warranties or GAP insurance on your bill. These are immediate red flags!
Bad Credit Scam. This scam is definitely targeted at people like you and offers another great reason to know your score before hitting the dealership. In this scenario, the dealer feels you out to see if you do, indeed, know your score. If you don’t come prepared, they’ll scare you into thinking you can’t get financing anywhere else. Often people with bad credit will settle for less than they deserve. The dealership is not required to disclose the score, so you can easily get snookered in this classic scam.
Finance Markup. In this scam, the dealership searches around for average interest rates. Then they mark up the rate offered to you by several percentage points. While this may not seem like a huge deal, a one to two percent markup can really add up over time and isn’t necessary to complete the deal. Make sure to shop around for rates before going with the rate you’re offered. You’ll be glad you took this extra step!
#5: Shop with a Friend
There is definitely strength in numbers when it comes to negotiating a car loan. Taking one of your closest friends or a knowledgeable family member can give you just the confidence boost you need to negotiate a loan with ease. Dealerships are more likely to take a step back if there is a team effort vs. a one-on-one encounter. That said, taking a companion shopping with you is a great way to fight the car loan woes. Again, there’s strength in numbers!
Still Worried About Your Loan?
If you’re still concerned that your bad credit score is ruining your chances for a quality loan, we can help. Our team at AutoMax is working for you! We’ve been serving customers in Raleigh, Durham, Youngsville, and Henderson since 1989. We offer excellent terms on bad credit used car loans for consumers in a tight situation - with none of the scams mentioned above. We pride ourselves on being extremely transparent throughout the entire process. Give us a call or come visit today!