Do you know How To Buy a Car with Bad Credit?

For the average consumer, buying a new or used vehicle in the United States can be frustrating. It is a big investment that takes careful planning and research. It is especially difficult for those with bad credit. People with bad credit may be required to have a hefty down payment or a co-signer with their local car dealers. Fortunately, there are ways to find local dealers or lenders in your zip code that are willing to finance consumers that have bad credit. It takes some careful planning and research but it will help in the long run to avoid falling into the hands of some shady car dealers that are ready to take advantage of the most vulnerable. 

Before rushing out to the dealership, there are a few things that can be done to avoid getting approved with loans with outlandish terms or taken advantage from some Buy Here Pay Here dealers that do not have the best interest of the customer in mind. Being prepared is the best way to help avoid some costly mistakes or wasted time.

1. Determine the type of vehicle that you need. Unfortunately, bad credit loans come with much higher interest rates. Take into consideration family size to get the appropriate vehicle. Take fuel consumption into consideration and how many miles you will be traveling each day. Don’t focus on unneeded amenities that will drive the cost of the vehicle up. 

2. Credit checks are a major part of the process of getting approved for financing. That may seem like a no-brainer fact but what needs to be understood is that by knowing what is in the credit report before visiting the dealership can save you a lot of time and money. Credit reports are available for free once a year from all of the major credit bureaus. Get a copy of your report from all three of the credit bureaus and check them carefully. Look for errors and get those errors corrected as quickly as possible. If there is negative information that is seven years old or older, there are tools available to help correct the issues.

3. For optimal results, deal with mainstream dealers. These dealers are more reputable and are experienced in dealing with financing institutions to help customers get set up with auto loans. Beware of some Buy Here Pay Here dealers that provide financing on site without the use of credible lenders. They prey on those with bad credit and demand ridiculous terms that are difficult to adhere to. They thrive on customers that default on payments because they make big money off of repos.

4. Once you are ready to start visiting these dealers, be sure to have a list of references from landlords, employers or other professional references that can speak on behalf of your credibility. Most reputable car dealers will require a down payment of at least $1500 or more so it will be wise to start saving funds toward the down payment along with other fees including tax, title and insurance.

Now that you have taken the steps needed to get started on shopping for your next vehicle, it would be equally essential to know beforehand what your financing options are. There are numerous lending institutions that help customers who have bad credit. Unfortunately, not all lenders are the same and there are scams out there. Being informed of these scams can be a real money saver and keep you from getting in too deep with a situation that will be difficult to get out of later.

Bait & Switch:

The bait and switch scam, also called yo-yo loans, is an extremely tricky maneuver that dealers have used to entrap people with a loan with bad terms. What happens is that once you choose a car that you want to purchase, you meet with a specialist who handles financing. They find you a loan with terms that you can handle and the papers get signed. They allow you to take delivery and you leave the lot with your new vehicle. Next, you get a phone call saying that the original loan could not get approved and you will need to return the dealer and set up a new agreement that more than likely, has higher interest rates and larger payment schedule. To avoid this, never leave the lot until you are assured, undoubtedly, that you have been approved for the loan that you have agreed to abide. 

The AS IS-NO WARRANTY dealer:

You find a car at a dealership that has a car that is reasonably priced. The dealer offers a great deal with payments that are within your means. However, there is a big sticker on the car that says in big letters, AS IS-NO WARRANTY. The dealer tries to assure you that it is standard practice to post this on the car but the car is in good condition and there is nothing to worry about. Don’t take his word for it. Consider purchasing an auto history report and research everything that this car has been through. You can also look at the title but titles can be altered.

Dealer Refuses Online Financing:

This is a red flag. If you have found financing through an online lender and the dealer refuses to accept it, leave the dealership. Dealers who don’t want to accept the financing from your pre-approved lender does not have concern for your best interests. They want to try and pull you into an agreement with a loan with outrageous APR rates and payment plans.

If you choose to find financing on your own before heading out to the dealership, you want to find reputable lenders that work with subprime consumers. If you have done your due diligence and you are ready to take the next step toward car ownership, you will want to do your homework when it comes to finding a lender. These lenders specialize in helping people that have bad credit. Bad credit happens sometimes because life can throw curve balls that can hit our finances pretty hard. It is a difficult and a long process of getting back in the good with the credit bureaus but if you have credible references, you can still get financing. Be sure that you are dealing with a lender that is reputable and experienced. Here are a few options to consider:

Auto Credit Express:

Pros

• Will work with people who have filed bankruptcy

• Have options for cars that are older

• Reputable, trustworthy and experienced

• Accredited with Better Business Bureau and has an A+ rating.

Cons

• Will not fund loan for a private seller

Capital One:

Pros

• Liberal on terms for the vehicle

• Big bank lender that is reputable

• Terms for subprime are generous when dealing with credit scores

Cons

• Loan terms must be for an amount of at $4,000 and no more than $40,000

• Will not fund loan for a private seller

Car.Loan.com:

Pros

• Same day approval

• No application fees

• Work with multiple lenders

Cons

• Will not fund loan for a vehicle from a private seller

This is just a small sample of financial options that help with subprime consumers needing a vehicle. You still want to do your research before choosing a lender. You want to find an experienced lender who is knowledgeable in finding the best options for your situation. Find a lender whose mission is to help the person. There are lenders that judge you by your credit report. While a credit report does paint a picture as to your creditworthiness, it does not tell the whole story. Believe it or not, there are companies out there that understand. 

If you are prepared beforehand, the car buying experience can go smoothly. As long as you know what to expect beforehand, you can avoid a lot of pitfalls along the way. Being an educated consumer will definitely help in making a smooth transition into car ownership.

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