If you’re in need of a used auto loan and your credit isn’t ideal, you may find yourself asking the question: “Can I buy a car with bad credit?” The good news is you’re not alone. There are car loans for people with bad credit and many people take advantage of them every day. Unfortunately, the widespread perception is that by taking out a loan with bad credit, you’re going to incur an extremely high interest rate and there’s not much you can do about it. This isn’t true. There are several things you can do to protect your credit and yourself during the loan shopping process, as well as measures you can take to avoid being overcharged.
Cleanse Your Credit
Before going out and applying for a bad credit auto loan, a couple questions you may find yourself asking are: “How can I fix my credit to finance a used car?” and“How long does it take to fix bad credit?” Credit scores, by nature, stick with you for a while. Luckily, there are ways to double check yours and make sure your credit history and current credit activity are being accurately represented. If you’re wondering why your credit history affects your loan rate, this is where you will be able to take a closer look and find out why.
You can do this by checking your credit report and scores yourself. This is vital to your auto loan process because many times, auto loan applicants are under the impression their credit is actually in worse shape than it is, causing them to settle for a much higher rate than they could qualify for. There are free sites, such as Credit.com, where you can get your credit score and a detailed overview of your credit report once a month.
With your up-to-date credit report in hand, you can examine all the variables that are impacting your score and determine whether or not there are any mistakes. This gives you the opportunity to address and correct any discrepancies, which will automatically boost your credit score. If you have the time, allow at least 30 days after disputing credit report mistakes and check to ensure they’ve been fixed before you begin to shop for an auto loan.
Best Practices
Be wary of your credit throughout the process of shopping for an auto loan. Each time a potential lender pulls your credit report, an inquiry pops up on your file. Each of these every inquiries can have a negative affect on your credit score. The majority of credit score models will keep track of each auto loan inquiry within a particular window. These windows typically stay open for between 14 to 45 days each. To be careful, halt your auto loan shopping after two weeks to protect your credit score from more harm.
While you’re out shopping for vehicle loans, be sure to avoid “Buy here, pay here” car dealers. These dealers may seem attractive at first glance because they openly advertise loans regardless of your credit history. However, the rates tend to be high, the quality of the vehicles can be low, and they don’t report to credit bureaus. Another good way to go for your overall finances and credit is to opt for as short a term of a loan as you can afford.
A 3-year loan will come with a lower interest rate than a 5-year loan, and so on. Shorter-term loans have lower interest rates, but higher monthly payments. Although it sounds unappealing and you may be tempted to spread out your loan term over five or six years in order to decrease your monthly payments, you’ll be trading it off for a much higher interest rate and your car will cost you much more in the long-term.
At DeBoer’s Auto Sales and Service, we individually select the best pre-owned vehicles in the North Jersey area and offer them at competitively low prices to deliver the best value. We will work with you and your credit scores to help you get on the road with the right vehicle for you.
