Just because you have bad credit doesn’t mean you won’t be able to buy a car at a price you like. Sure, it’s more challenging than if you have perfect credit, but there are steps you can take to get a good deal.
The following tips will help you buy a car with bad credit.
1. Check your credit score
Whether you know why your credit score is low or not, it’s always a good idea to check it before making a significant purchase such as a car. For one, you may find errors on your credit report than can be corrected (and help improve your score). You can get a credit report snapshot from Credit.com, while the three major reporting agencies – Experian, TransUnion, and Equifax – will each send you one free report per year.
2. Decide between a new or used car
Buying a new car has many benefits – including a full warranty, free maintenance for several years, and all the latest features and innovations. If you have bad credit, however, buying a new car may mean you have to settle for fewer features to keep costs down.
While you may get more car for your money by buying used, you won’t have the advantage of a full warranty and a newer car will have a lower interest rate.
3. Find a dealer who will work with you
Finding a dealer who will work with you is crucial if you’re buying a car with bad credit. McGrath Nissan has several lending institutions that they’ve worked with, which gives you plenty of options depending on your credit situation.
4. Shop for a specific time period
Shopping around for auto loans enables you to find the best deal for your budget and financial situation. However, when you apply for a loan and a lender checks your credit, a new credit score is created. Applying for multiple loans over a long period can lower your score. But credit checks in a 14 to 45-day time frame will count as only one inquiry.
4. Consider getting pre-approval
Getting pre-approved for an auto loan offers the peace of mind that allows you to shop while already knowing the terms of your financing. There’s a lot to think about when buying a car with bad credit, especially if you’re trying to find the right vehicle and the right financing at the same time.
5. Make a down payment
Making a down payment when you’re buying a car with bad credit can make a big difference in the interest rate that covers the length of your loan. A general rule of thumb says that you should make a down payment of 20% (of the purchase price) on a new car 10% on a used car.
6. Focus on interest rates and loan terms
It’s helpful to focus on interest rates and loans and not monthly payments when buying a car with bad credit. Ideally, you want the lowest interest rate over the shortest period of time.
7. Get a co-signer
If you’re a borrower with bad credit, you can improve your chances of getting approved by applying with a co-signer who has good credit. Note: a co-signer is obliged to meet missed payments or pay back the loan if the borrower is unable to do so.
The Finance Department at McGrath Nissan of Elgin, serving residents of St. Charles, Streamwood and the surrounding area will work with you to find the best loan if you don’t have good credit. You can get started by filling out an online application today.