It's a common misconception that you can't finance a vehicle if you have less-than-perfect credit. Sure, if you have bad credit, it isn't as easy to obtain an auto loan. But, it isn't impossible. Learn what to expect when trying to obtain an auto loan with bad credit and where to look for financing.
There are lenders that will finance buyers with bad credit who are looking for auto loans, but you need to assess your options realistically. Whether you purchase a vehicle from a buy-here-pay-here car lot or you've found a lender that will give you a bad credit auto loan, you should expect your interest rates to be fairly high. If a lender considers you a high-risk buyer, you might have to pay an interest rate between 10 and 13 percent. In fact, interest rates for bad credit auto loans can even be higher than that. The rate you'll get depends on your credit score.
Unfortunately, a higher interest rate means that the payments on your auto loan will be higher. So, before you start looking at cars, you need to examine your finances to determine how much you can actually afford to pay on an auto loan each month. You might need to purchase a less expensive car to compensate for the higher interest rate. Regardless, you shouldn't expect to purchase a fairly new car and still have a low monthly payment.
Increase Your Down Payment
If you're worried about the cost of your monthly payments, you should consider increasing your down payment. The more money you pay upfront, the less you'll be financing, which in turn, means your monthly car payments will be lower. However, before you decide to increase your down payment, you need to consider a few things. First, does the amount of your down payment affect your interest rate? Some lenders offer lower interest rates to people with higher down payments. If the amount you pay will lower your interest rate, then, increasing your down payment might be a good options for you. If it doesn't, you should ask the lender how much your monthly payments would be with a higher down payment before agreeing to it. If it doesn't affect your monthly payment much, you may be better off saving the money and using it to pay some of your monthly payments in advance. Remember, when you purchase a car, you'll also have to pay for gas, car insurance, and repairs, so you shouldn't increase your down payment if it will deplete your savings account.
Getting an auto loan when you have bad credit isn't a typically an easy task, but it doesn't mean that you have to drive an old, beat-up car forever. Take some time to review your options, and eventually, you'll find an auto loan that fits your needs.Share