Got bad credit and in need of a car? The best thing to do is save money and pay for the vehicle in cash. If the idea of buying a car with cash doesn’t appeal to you, you can always make the purchase through financing, though with a higher rate. Here in Oklahoma City, you can successfully secure a bad credit car loan, as long as you follow these steps:
Get a copy of your credit report and know your score
When someone tells you your credit is bad, don’t take their word for it. Find out for yourself. Visit AnnualCreditReport.com to get a free copy of your credit report from each of the three credit bureaus. Your Equifax and TransUnion FICO scores are not free, but it would be a good idea to get these as well; these are available at MyFICO.com.
Find a co-signer
Somebody else’s credit can help you secure a bad credit car loan. Dealerships usually have no problem approving loan applications of those with bad credit as long as they have solid co-signers. If you have a family member or friend with good or excellent credit, get them as a co-signer. Know that your loan will also appear on the credit report of your co-signer, so make sure you can repay the debt. If you default on the auto loan or make a late payment, the co-signer’s credit will be affected.
Start repairing your credit
Before you apply for an auto loan, work on your credit first. Make payments consistently and on time. Why do you need to do this? Having a clean history a few months prior to the loan application will work in your favor: if the lender sees how consistent you are with repayment of other financial obligations, you are more likely to get approved. Maintain a clean history for at least six months before you start loan shopping to improve your chances of getting financing.
Consider all lending options
As someone with bad credit, your first instinct may be to seek lenders that specialize in subprime lending. However, you should start with traditional lenders like banks and credit unions. Even if you don’t think you will get approval in these places, try it out anyway. Check out all sources known for auto loans, not just creditors that serve low credit clients.
Look at the bigger picture when setting a budget
It is no secret that bad credit car loans come with higher rates, and higher rates mean higher monthly payments. In order for you not to get in a worse financial situation with an auto purchase, you must budget properly. When you consider car options, don’t just think of the loan payments; also think of other ownership costs like car insurance as well as maintenance and repairs. If you can afford the monthly payment, insurance and other costs, and still have some money left, then your purchase is a good one.
Bring someone along
You can apply for an auto loan alone, but it would be better to have company. Having someone else to take note of details helps you get a good deal despite bad credit. If you have a co-signer, talk to him or her beforehand about paying attention to loan terms and other important information.
Check for and refuse add-ons
Speaking of important information, you should watch out for add-ons. Dealers tend to include unnecessary additions in the lending contract, making your loan more expensive that it should be. Keep an eye out for the likes of extended warranties and after-market services, and refuse to pay for them.