The reasons for a low credit score are aplenty. It could be a bit of immature spending when you first received a credit card accompanied by unpaid bills. It could be more solemn, like job loss or family issues that meant money was too tight to make your payments. It might be the simple fact you’ve never needed to take out a loan before. Yet, here you are, with a low credit score and are looking to buy or lease a car.
What can you do about it? With a little guidance, you can buy a car or sign a lease for a car even with a low credit score. Here are a few tips.
Choose a Car Within Your Means
If your credit score is less than stellar, you’ll need to temper your wants with your needs. Decide which options are absolutely essential and which ones you can do without. Your best choice for buying a car when you have poor credit is a newer vehicle with a low price tag. Auto loan companies perceive these types of loans as the lowest risk.
Scrounge Up a Down Payment
To show you’re serious about buying a car, have a down payment collected and ready when car shopping. The cash you have to put down on the loan or lease seems to make lenders work a little harder.
A down payment makes your loan more attractive because the percentage of the vehicle you’re borrowing is lowered. It also means you can finance or lease a more expensive car.
Know Your Options
Sometimes, leasing is an easier way to get the deal done on a car purchase. Other times, a purchase is more likely to be successful. It can vary from vehicle to vehicle and from dealership to dealership.
When you have selected the vehicle you want, determine the best option for your situation with the salesperson. You might need to switch your vehicle selection to make the deal work.
Shop for the Best Rates
You already know your credit rating isn’t at the top of the scale. However, that doesn’t mean you have to accept whatever high-interest loan you’re offered first. Determine three to five lenders or dealerships that work with low-credit situations near you. Seek out lenders that are reputable and are rated well online, and then request pre-approval.
Compare the interest rates and repayment terms, selecting the best one for your situation. You’ll also want a quote from credit unions and the financial institution you normally use. Sometimes, the personal touch makes all the difference.
Buy Here Pay Here Car Loans
Another option that’s gaining popularity is Buy Here Pay Here (BHPH) car loans. These are typically lenders who use their own funds to get you driving. That means your car loan or lease isn’t financed by a typical bank or lending institution. The lender has the flexibility to offer car loans and leases to anyone they’d like, including those with low credit scores.
If you choose to check out Buy Here Pay Here car dealers, be vigilant about your purchase. Know what the vehicle is worth – some seedy used car dealers jack up the price when low-credit buyers are on the hook, and sometimes the vehicles are in rough mechanical shape. And don’t get roped into astronomical interest rates right off the hop. In some cases, used car dealers charge up to 30% interest on BHPH loans.
Know What You’re Signing
It’s great to be thankful for getting a loan or lease for your car. Just make sure you read through all of your paperwork thoroughly before you sign on the dotted line. It’s a contract, so you’re responsible for knowing what you’re getting into.
Make Your Payments
Most importantly, never be late or miss a payment. It makes a lasting mark on your credit rating and can make future purchases difficult.
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