Five Tips for Obtaining Car Financing With Bad Credit

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While having less-than-perfect credit may prevent you from getting the best loan terms available, it certainly does not have to prevent you from getting an auto loan altogether. Getting a fair auto loan is still very possible.

A few years ago I was at a dealership and a young man was signing a car loan at a whopping 18%. I don’t think this young man knew how to do math. At the very least he didn’t do enough research. He had said he went to one other dealership that turned him down because of his bad credit and now felt that he had to go with this one. I urged him to try some of these other options before signing but he had made up his mind.

Here are five tips for obtaining car financing with bad credit.

1. Check Your Credit Report

Start your car buying process by determining just how low your credit is. Be sure to check all three of your credit reports instead of just one, as each of the three major credit reporting agencies report the numbers slightly differently.

2. Improve Your Credit, If You Can

Once you know what your credit score is, look for ways to improve it. Start by checking for any misinformation and getting it removed from your report. Catch up on any missed payments as well. Paying down large debts will help your credit score too, but you may need to save that money for your down payment instead.

3. Assess Your Needs

When it comes time to actually look at cars, don’t just consider what cars you like or what cars are readily available to you. Figure out which features you need in your car and what price you can afford to pay. If you don’t have much money to spend, you may have to go without extra, unnecessary features like seat warmers or a nice stereo system.

4. Shop Around

Armed with a good idea of what you need and what you can afford to spend for it, visit as many car dealerships and lenders as possible to see what they have to offer. Prices and rates can vary significantly between companies, and the more quotes you can get, the more room for negotiation you will have.

Many think that dealerships are the only option to getting a car loan from a bank. But this isn’t true. There are other options like Money Barn, credit unions and calling the bank directly. For cars, check dealerships, used car lots, Craigslist, online car sites and local newspapers. The more options you have, the better.

5. Do the Math

As you receive offers from dealerships and lenders, don’t forget to look at the terms and conditions carefully. Look not only at the price per month, but also at the total price by the time you pay the car off. See if the interest rates are fixed or variable, and look for jumps in payments or interest rates. Make sure that the deal you are getting is truly a good one before you sign on the line.

Whether you are looking for a new or used car, don’t let your bad credit stop you from getting the car that you need. These five tips will help you get the loan you deserve.

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