Trying to buy a new car with less-than-perfect credit may seem like an impossible task. However, there are actually many lenders out there who are willing to work with people who have bad credit. The key is finding these lenders.
A good place to start when looking for car loans for people with bad credit is by talking to the dealership where you are purchasing your car. Oftentimes, dealers have agreements in place with lenders designed specifically for people with bad credit. Depending on where you purchase your car, the dealer may be able to connect you with a lender who can provide you with a loan. In most cases, you will have to provide detailed income verification in order to qualify for one of these loans. However, they can be a good option if you have a few black marks on your credit report.
You can also try applying for a car loan at a bank or credit union. Typically, small-town banks are more likely to give out loans to people with bad credit than larger, national banks. The same holds true for credit unions. If you already do your banking at a small bank or credit union, try checking there first to see if they will provide you with a loan. If not, you can check with other lending institutions in your city.
In many cases, people are hesitant to apply for too many loans because they are worried that the inquiries will lower their credit score even further. However, as long as you apply for the loans within a short window of time, they shouldn’t continue to drop your credit score. The majority of credit scoring models take into account the fact that most people shop around for the best rate. Because of that, multiple applications that are filed within a very short period of time won’t cause additional penalties.
If you do find a lender who is willing to loan you money for a car, be sure to read the fine print of the loan agreement carefully. Oftentimes, loans for people with bad credit have exceptionally high interest rates or hidden fees. This can significantly add to the amount of money that you have to pay back over the life of the loan. Knowing these details up front allows you to enter into the loan with your eyes wide open so that you aren’t caught off guard by any unexpected surprises.
Although high interest rates are not ideal, they are often one of the unfortunate realities of borrowing money with bad credit. As long as you prepare for the fact that you will have to pay more in interest than someone with good credit, you should be able to factor that into your budget so that you can easily make your loan payments on time.
If you have bad credit, it can take a little bit of work to find a car loan. However, as long as you are diligent, chances are you can find a company that is willing to lend you the money to buy a new car.