Cars are a reliable form of transportation but it can be very expensive, which is why many consider auto financing. If you plan to avail of auto financing, there are many things that you need to consider. You should start with your credit.
You must know that lenders will review your credit history before issuing a approvals. This is how they predict how likely you are to pay the loan based on the stipulated time. With this, it is a good idea to check your credit scores and reports before applying.
If you have stellar credit, you have many financing options. If you do not have good credit, there is still another way – car loans for bad credit. While you can still get auto financing with bad credit, you must be prepared because the interests tend to be higher.
If you do not want bad credit to stand in the way, you can start looking for the best online car buying sites. Aside from this, here’s how to buy a car with bad credit:
Refrain additional bad credit items
Buying a car shouldn’t be a spur of the moment thing. It should be well thought of. So, in the months leading to your loan application, you should be on your best behavior.
This means you have to pay everything on time and not take on major credit obligations – including getting a new credit card. Keep in mind that lenders may decline your application if you pay the rent and debts late.
Review current interest rates
You can review current interest rates conveniently – just check online. This will give you a better understanding of the rates. Having good credit, the rate will be below average but with a bad one, you typically land with a higher interest rate.
Though you should expect a higher interest rate, you have to be skeptical. The loan rate should not be more than double the average. If you come by to this kind of rate, it is time to turn the other way.
Make a larger down payment
Ideally, by purchasing a car outright, you avoid dramas like interest rates and loan terms. If you do not have the money, you should at least aim to make a larger down payment. The rule of thumb is to make at least 20% down payment.
If you make a larger down payment it can offset the taxes, interest and even the fees. In the end, you stand to gain more if you pay the larger down payment. Do not drive the car without a down payment because you will be at risk.
Determine what you can afford
In the end, you have to determine what you can afford to pay. You may be overwhelmed but you have to take a step back and think about the extra money you have left after paying your monthly bills.
Of course, the best solution is to build your credit. While this is time-consuming, it is the surefire way to get approved. You should change your habits by consistently paying your bills on time, minimizing your debt-to-income ratio and saving more.