Getting loan for car can be a bit tough if your credit score doesn’t present a positive picture. There are both traditional and modern-day institutes which are eager to lend money to potential car buyers. However, they weigh in all your risks and credit-worthiness before handing you the money and deciding the rate of interest. It can be really difficult to convince a traditional institute like bank to grant you car finance if you are running in bad credit. Even if they do grant you finance, they will charge you very high rates which can cost you a lot more money than you had prepared yourself for.
However, there are some modern day companies and dealers who provide low-interest car finance with bad credit. Nevertheless, your existing credit position will indeed play some role in deciding the rates and terms. So, here are some basic tips and advices which you should keep in mind:
- Scan through your credit reports: You must try to figure out the exact condition of your credit. It is always a good thing if you know exactly where you stand. Prudent thing to do will be to ask the major credit bureaus to submit you their reports. You can also go through them to find out the veracity of the statement. At times, errors may be committed by the clericals which can have a further negative impact on your credit rating. In case you find some anomalies, you can lodge an official complaint to get them rectified.
- Wait for some time: If you find that your credit rating will improve after the bureaus rectify their mistakes, then you should wait for the time being. In case, there is no error on the part of the bureau and your score is genuinely very bad, you can wait for a few weeks and try to undo some of the damages. You can clear some of your debts to get slight improvements in your score. Improvement in rating casts a positive impression on the mind of the lenders who will, thereafter, be willing to grant you finance at lower rates.
- Stock some money for higher down payment: While obtaining car finance with bad credit, you must be ready to part with a higher sum of money for a higher down payment. When your credit score is poor, lenders will not be ready to grant you higher loan unless you pay a very high rate of interest. But if you are willing to increase your down-payment contribution, then your bargaining power improves and rates also decrease.
- Make timely payments of accumulated debts: Your poor credit score reflects your inability to clear your debts, which must have accumulated over the months. It’s time that you start clearing some of those debts. It will be wiser to pay 5 smaller debtors instead of paying 1 big debtor.
- Hire a cosigner: Another wise move will be to take car finance with the help of a cosigner whose credit rating is positive. That cuts down the risk factor and helps you secure low-cost loans.