Buying a Car With Bad Credit
We know that checking your credit (or anything remotely related to your credit history) can be intimidating and cringe-inducing. Especially if you have a low credit score (a low credit score is anything under 629).
Bad credit scores happen to good people. Whether you’ve made a few late payments, were the victim of identity theft, or simply just didn’t have enough years on your credit history, your credit score is a reflection of your credit history, but shouldn’t be what dictates your future.
At BC Drive, we work with all credit standings: good, fair, poor, or none. Here’s how you can purchase a vehicle even if your credit is bad.
Don’t assume that because you have bad credit you can’t get a car loan. Your definition of bad credit might not be the same as your lender’s definition, and different lenders offer different rates. Always consult with multiple lenders. It’s a common misconception that you have to settle for the first financing offer you receive; in fact, it’s smart shopping if you’ve done your research and consulted with other potential lenders. These can include banks, credit unions, dealer financial services groups, the car dealership, or finance companies.
Consider opting for a shorter loan period. You might have low monthly installments if you go with a five-year plan, but the interest rates will make up the difference (interest rates are usually lower for short term loans, meaning you end up paying less for your car overall). Not to mention, the quicker you pay off your car, the more time and money you’ll have to pay off other loans to help raise your credit score.
You may also want to consider getting a co-signer. This might be your best option for securing a car loan at a reasonable interest rate. Just keep in mind the weightiness of asking someone to be your cosigner. They become responsible for making your payments in the event you are unable to fulfill your loan obligations. Only take this approach if you are confident you’ll be able to make your payments on time and in full.
Remember that your credit score, wherever it is on its spectrum, dictates what type of interest you’ll end up paying on your car loan. So if your score is floating around the low end (less than 600), chances are you’ll be paying higher interest rates, as high as 20%, maybe even closer to 30%. Don’t let this scare you away, though. With good planning and budgeting, you should be able to make successful payments every month, so long as you’re willing to make sacrifices in other areas.