Tips for Getting a Used Car Loan with Bad Credit
If you need a car, but you have less than favorable credit, all hope is not lost. You can still get a used car loan with bad credit. For tips on how to do so, keep reading.
First, do what you can to boost your score before shopping for a car. Some ways to boost your credit include paying down debt on credit cards, avoiding opening or closing credit accounts, and limiting the number of hard pulls on your credit account. A hard pull shows up on your account after applying for a loan.
Once you’ve done what you can to raise your credit score, the next thing you want to do is find a reputable place to shop. “Buy here, pay here” dealerships have in-house financing that approves anyone, but that doesn’t mean you’re getting a good deal. Many times these places have extremely high interest rates on low-quality cars. Even if you have poor credit, you don’t need to shop at a place like this to get what you need.
Unfortunately, if you have low credit, you should expect to have higher interest rates on a loan. For those who have a credit score of 700 or more, your used car loan will likely have a 3 to 5 percent interest rate. For those in the 600 to 660 range, this number goes up to 10 percent. This number goes even higher, to 15 to 20 percent, if your credit score is between 500 and 600. There isn’t much you can do about this, but at least you can prepare yourself for these interest rates.
One way to get better rates on a loan is by reducing the amount of money you need to borrow. When buying a used car, you can do this by putting down a significant down payment. The more money you put down, the less money you need to pay monthly on the vehicle. The less money you have to pay monthly, the lower your interest rates. If possible, try to save up some money to use towards a down payment when you find that perfect car.
Even if your options are reduced because of your credit score, you still have choices when it comes to applying for a used car loan. Search around for places that will pre-approve you. Find out what the interest rates on these loans look like and pick a car financing plan that makes the most sense for you. Once you’re familiar with your options, you can better negotiate as you shop for a used car.
Discover the best used cars at Certified Headquarters. You can find our used car dealership at 873 Middle Country Road in St. James. We look forward to seeing you here and we can’t wait to help you discover the best vehicle for your budget and lifestyle.