When you’re ready to buy a new car, it can be an exciting time! However, if you’re stuck between a rock and a hard place with bad credit, finding the right car loan at an affordable monthly rate can be difficult.
However, we’ve compiled a few tips below to help bring down your payments and also prevent you from overspending on your auto loan.
Naturally, when we think of an auto loan, we tend to look at the monthly payments first. For most people, a low monthly payment can seem like the most affordable route. However, dealers are notorious for taking advantage of buyers and inflating prices with additional “add-ons” like factory options, warranties, and more if you give them a set amount you can pay per month.
Usually, the first step you want to take is to get pre-approved for a certain amount from your lender or bank. Being pre-approved will allow you to focus on the price of the car at the dealership instead of the financing aspect of it.
In order to obtain pre-approval, you will need to have an idea of what your credit score is. You can access your credit score for free here.
Short Term Loans
The length of the loan also plays an important factor in your payments. Overall trends show that consumers are now taking out longer-term loans when it comes to purchasing a new car.
Although a long-term loan tends to offer low monthly payments, it is also important to consider that your interest charges will be on the rise.
If you have a history of a fluctuating credit score and financial hardship, having a long-term loan (over 5 years) can put you in a bind. It is hard to tell what your financial situation will be like in 6-7 years, and you will still be required to make payments then.
Long-term loans also add much more interest to your payments than what you would pay with a short-term loan. Taking on a shorter loan term (5 years or less) can be the key to saving hundreds if not thousands of dollars in interest expense.
To see how much the loan term can affect the interest you pay, simply input the cars price and interest rate in the calculator below.
Search Far and Wide
Be certain that you check your credit score and credit report before you search for your next new car. Imperfections or errors on your credit report can cost you money when it comes to interest rates and payments. Set a budget for yourself and shop for vehicles within that range.
Once you’ve found the car of your dreams, walk into your trusted bank or credit union and see if you can apply for a car loan. Once pre-approved, you can walk into the dealership with confidence, as the dealership will also try to beat the loan interest rate that you were pre-approved for.
Having less than perfect credit can make it hard to get approved for auto loans. If you are looking for a new vehicle with poor credit, you may have to buy from a dealership that works with people who have bad credit.
If you decide to take on the challenge of fixing your credit score before buying your next car, Credit Sesame’s credit score tools can help you track and monitor your progress for free.
All in all, if you have bad credit and are trying to finance a private party car sale, you need to find a subprime lender who can work within your budget and location. CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.