Is Buy Here, Pay Here Financing Right for You?
Let’s be honest – is Buy Here, Pay Here financing the best possible way to buy a car? No. The best way to buy a car is to hand over enough cash to foot the entire bill of sale. However, very, very few among us have that option – even people with excellent credit still may not have enough money set aside to pay for their car in cash. And for those of us with credit that is anything less than excellent? Well, unfortunately, our options are a little more limited, which is why working with a reputable dealer who uses Buy Here, Pay Here financing can actually be a great way not only to acquire your new car, but also to build your credit back up. How does Buy Here, Pay Here financing work and what are the major pitfalls you need to be aware of? Read on to learn more about this unique way of purchasing your next car.
When Having a Car is a Need, Not a Want
For the vast majority of people, not having a car is just not feasible if you want to get ahead in life. Unless you live in a major, walkable city, there are very few other ways to commute to work. And if you can’t get to work, how are you going to make and save money? This is the sad cycle we often run into when people are looking to finance a car with poor credit. Of course, these people are not bad people – although often they feel very embarrassed about their situation. These are people who need a break – just a little leg up in order to start being able to put money aside, pay off bills, and increase their credit score. When used correctly, Buy Here, Pay Here financing can help put an end to the struggle of trying to make ends meet.
Here’s how it works: typically, a car loan is financed by a bank or another financial institution. With Buy Here, Pay Here financing, your loan is financed by the dealership itself. Why is this a good thing? Because the dealership has more flexibility to work with clients who have poor credit, which means there is a very good chance that a Buy Here, Pay Here dealership will be able to get you in a car that perfectly suits your needs, all without the stress and worry that you’ll be rejected for a loan.
How Does Buy Here, Pay Here Financing Benefit You?
Obviously, the biggest benefit to using Buy Here, Pay Here financing is that it helps a dealer get you into a car whereas that might not be possible if you were to finance through a bank, credit union or other financial institution. Of course, once you have secured the financing and are driving away in your new-to-you-car, a whole world of possibility opens up. Perhaps you’ll be able to find better employment opportunities now that you have a reliable set of wheels, enabling you to make more money and pay down some debt, which in turn will boost your credit score… so the next time you shop for a car, you may be able to finance it in a more traditional manner – or maybe you’ll even be one of the lucky few who actually can buy their next car all in cash! Who knows? The opportunities are endless, but they start with getting a car via Buy Here, Pay Here financing.
There’s another big benefit to keep in mind with Buy Here, Pay Here financing. Think about this – at the same time that you’re using your new car to make positive life and career choices, you’re also going to be paying off the Buy Here, Pay Here loan… which means your credit score will start going up. If used correctly, Buy Here, Pay Here financing can be the first step in launching a positive cycle that will see your credit score rapidly start to rise, which means the next time you shop for a car, you won’t have to worry about the rejection that poor credit brings. Just make sure to confirm with whatever Buy Here, Pay Here dealer you end up doing business with that they actually do report your on-time credit payments to the credit bureaus – you don’t want to to have a history of perfect on-time payments and never actually receive credit for them. Better yet, track your credit score yourself using a free tool such as Credit Karma. It’s a great tool for motivating yourself to make on-time payments and you’ll be amazed at the gratification you feel as your credit begins to go from poor to excellent in no time at all.
Keep in mind, your success using Buy Here, Pay Here financing is not just the dealership’s responsibility. There’s a reason that Buy Here, Pay Here financing has a questionable reputation, and that’s because of the huge percentage of people who finance their cars using Buy Here, Pay Here who then turn around and default on their loan. It’s important to realize that because the dealership is taking a risk on you and your shaky credit, they are going to attach higher interest rates on the loan than you would typically see on a loan financed through more traditional avenues. Sometimes the interest rates are in the double digits, and it is critical that you know exactly what you’re getting into if you decide to go the Buy Here, Pay Here route. Find out your monthly payment and be sure you can cover the bill before you sign on the dotted line. Just as Buy Here, Pay Here financing has the ability to help you get your life back on track when used wisely, it also has the ability to backfire on you and leave you in a worse financial position than you were originally.
Is Buy Here, Pay Here Financing Right For You?
In order to find out if Buy Here, Pay Here financing is right for you, you need to ask yourself a few key questions. First of all, are you sure that your credit is poor? It may be worth your time to see if you can secure a loan through a bank or other traditional financing center first. If you are unable to access financing through those institutions, then yes, you should consider Buy Here, Pay Here financing.
The next question you need to honestly answer is – will I be able to make my payments on time, every time? If you feel as though the extra payment will be a burden on you or that there is a chance you will default on the loan, then you should avoid financing of any kind until you are in a more stable position. Do not add more stress to your life by borrowing money that you won’t be able to pay back. Do not go to a Buy Here, Pay Here financing center if you already know that there is a good chance you’ll end up missing payments. However, if you feel that you’re ready to take on the responsibility of meeting your payments on time and in full, then go ahead and proceed with Buy Here, Pay Here financing.
While it’s true that there are shady dealerships who use Buy Here, Pay Here financing in order to take advantage of those people in vulnerable or precarious financial situations, by doing a little research, following the above guidelines, finding a reputable dealership and being responsible with making your on-time payments, Buy Here, Pay Here financing may be the first step in getting you into a new car and ultimately overcoming your poor credit history.