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CAN YOU GET A CAR LOAN WITH BAD CREDIT?

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CAN YOU GET A CAR LOAN WITH BAD CREDIT?

The recent economic climate has not been kind to most of us, and because of that, we’ve probably thought of this question for some time now. However, a closer look at the figures will let you in on the fact that approximately a third of Americans have bad credit according to Experian. The firm is a national credit bureau. So without a doubt, you might be part of the sixty-eight million consumers who make the list of persons experiencing an economic windfall.

Ironically, we have so many creditors in the industry that are willing and ready to offer car loans to individuals who have bad credit. In addition to this, you may all have bad credit scores but still, qualify for a loan. All applicants are in different positions such that the car loan you get hinges on your unique set of circumstances.

Subsequently, a bad credit score should not be a reason behind you not owning a car nor should it mean you get barred from getting a loan with favorable terms that suits your monthly budget. The word ‘bad’ is simply relative!

More loan offers and better interest rates for people with bad credit scores doesn’t necessarily mean you’ll get excellent deals. As a consumer, you need to know the type of car you want to own and at what interest rate, or the price you find affordable. Some of the things worth taking into consideration include:

Confirm your Scores Average Interest Rates

MyFico.com’s auto loan chart has all the interest rates for each FICO score range. It also comes with monthly payment amounts for a thirty-six, forty-eight and sixty-month loan. Linda Sherry, who’s the director of National Priorities for Consumer Action, says consumers ought to know where they stand before shopping for a car. She adds that as a client you need to be able to anticipate what’s to come from the market.

Opt for a short-term loan

It’s only logical to expect high monthly payments for a two-year loan as opposed to a six-year loan so be attentive on the interest rates. These rates tend to be lower for short-term loans hence you find yourself paying less for your car. Settling your debt before the loan period elapses will leave you with enough time to look for more funds elsewhere to pay other loans and eventually raise your credit score.

Don’t immediately assume your score is wanting

A predetermined cutoff score that eliminates some buyers from automatically being able to get finances doesn’t exist. One creditor might not offer you the loan due to your poor credit score but that doesn’t necessarily mean so will the next lender. Unfortunately, you should expect to pay more if your score is weak. Experian Automotive carried out a research and concluded that low credit scores (something below 550) earn an interest rate of below thirteen percent for a new car loan and eighteen percent for a second-hand car loan.

Backup your weak score by saving up

It’s only wise to save up for a big down payment. Let’s take a hypothetical situation where a client has a credit score of 550 but wants a car worth twenty thousand dollars. If this consumer brings around eight thousand to the table, they completely change the ballgame to their favor. Try to at least have 20% of the total purchase price as down payment if you’re going for a new car and 11% for a second-hand car. A high down payment will take you a long way in the event you suffer from an abysmal credit score.

Newer versus Older vehicles

You’d expect a used vehicle to charge less, but the irony is it charges more than a new car. It’s advisable to first search for a new car before settling for an old used car which doesn’t have the best financing options. We aren’t saying you won’t find better deals on used vehicles, so just go out there while leaving your options open.

Know your Score

Professionals will tell you just checking for your annual credit report, don’t amount to much. As a reminder, you ought to know the reports are readily available at no cost at AnnualCreditReport.com from each of the major credit bureaus. Go an extra mile and purchase your credit score from credit bureaus or myFICO.com. Rosemary Shahan, who’s the president of Consumers for Auto Reliability and Safety, advises subprime buyers to ensure they are aware of their recent credit scores to avoid bumping into obstacles along the road.

Get a Co-signer

If you think you have a very high debt-to-income ratio required to qualify for a loan, then getting a co-signer might be a wise move to make so that you can secure that loan at a reasonable interest rate. You need to be very cautious of who you choose as your co-signer because in case you are not able to make the full payments, the individual will be the one to fulfill the loan obligations. This can cause bad blood between the two of you. The approach should only get considered if you’re confident of making the payments in time. In conclusion, keep your emotions in check while making such decisions as they may end up making or ruining your entire life.

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