How to Prepare When Taking Out an Auto Loan on Bad Credit
So you may not have the best credit, but you are currently in the market for a new car. You know your options are somewhat limited, but they are not entirely as bad as you think they are.
Before you assume all is lost, take a minute to breath and be positive about your choices, as you do still have some afforded you.
There are some definite things that will help you get back on your feet and in a better position to be improving your credit score.
Relax and Research
Because you know you will have to be paying for your car with an auto loan for bad credit but you are nervous to see exactly what your credit score is, now is the time to remember to relax. Doing some simple research is going to prove very helpful.
First, find out your score. There are number of different websites to use. Remember this score is not set in stone and the more you work to improve it, it will go up and you will have better results.
Chose a Responsible Car
Next, it is a good idea to have some cars picked out ahead of time. When looking for used cars, because this is your best bet, have a model and year picked out so that you have a basic idea of pricing. Maybe even crunch some numbers yourself so you won’t be shocked or surprised when applying for you loan. Also showing up prepared is always better.
When you are looking for car, be reasonable. There are certain cars that dealerships or credit unions will feel better about loaning money for if your decision proves responsible. For example, a large SUV will not be a great choice, but a small or midsize sedan would be a better fit.
Save For a Down Payment
Once you have an idea of the car you are wanting, plan on offering to put some money down on the auto loan. A good estimate is about 10%. So let’s say the car is worth $4500, plan on going to the dealership or credit union with $450. Not only does this prove to the loaner that you are responsible enough to save money, but it proves that you are serious about your plan to pay it off.
Keep Your Loan Term Short
Finally, look at keeping your loan term to a minimum. It is easy to want lower monthly payments, but that happens when the loan term run longer, meaning adding more months till you’ve paid it all back. When you add more time to the loan, you are also adding more interest which means you’re paying more.
Make sure you can afford your monthly payments, but do it so that you are not adding more time to the length of the loan.
Lastly, keep your head up. Remember, it does get better.