Tips For Financing A Car With Bad Credit

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If you have a bad credit history, then financing a car will be challenging. Financial institutions can charge you a high rate of interest leaving you with high monthly car payments. These high monthly payments with high interest rates can end up making your credit history worse if you can't afford the monthly payments.


If you need a car, there are some steps you can take to help you get approved for a car loan despite your bad credit history. First, pull your own credit report before you start to shop for a car and review it. Any delinquent loans should be either paid up or caught up. If your score is 550 or less, you may need to repair your credit before financing a car. Second, You will need to save some money for the down payment. The more money down, the better off you will be when you go to purchase the vehicle. Third, Take your credit report when visiting car dealers. Most dealers have sub-prime credit departments to help people with bad credit finance cars. Show them your credit report instead of having them pull your credit at each dealership. Fourth, Choose a car based on what you can afford. The sales person will help you find a vehicle that is within the guidelines of their bad credit loan programs.

If you decide to finance your car, be aware that the financing obtained by the dealer, even if the dealer contacts lenders on your behalf, may not be the best deal you can get. Contact lenders directly. Compare the financing they offer you with the financing the dealer offers you. Because offers vary, shop around for the best deal, comparing the annual percentage rate (APR) and the length of the loan. When negotiating to finance a car, be wary of focusing only on the monthly payment. The total amount you will pay depends on the price of the car you negotiate, the APR, and the length of the loan.

Making on-time monthly payments on your new car will help you repair you credit and will benefit you if you want to refinance or trade-in your car in the future for a vehicle with more favorable monthly payments and interest rates.

Some dealers and lenders may ask you to buy credit insurance to pay off your loan if you should die or become disabled. Before you buy credit insurance, consider the cost, and whether it’s worthwhile. Check your existing policies to avoid duplicating benefits. Credit insurance is not required by federal law. If your dealer requires you to buy credit insurance for car financing, it must be included in the cost of credit. That is, it must be reflected in the APR. Your state Attorney General also may have requirements about credit insurance. Check with your state Insurance Commissioner or state consumer protection agency