Bankrate.com is one of the most respected personal finance websites out there, and for excellent reason. They’ve spent years teaching us how to collect and spend your money better. And they have some smart tips for getting auto financing with bad credit even those of us with good credit could stand to keep in mind.
Make Sure You Can Afford It Before You Buy
It sounds simple, but it’s still something you should do: Look at your budget and what you owe before you buy a car. Really, you should focus on paying down debt and removing those money payments from your budget if at all possible. Realistically, however, not all of us have such a luxury, especially if we need to replace our car. Still, get a sense of what you can afford for a payment, and pay down what debt you can; it will streamline the shopping process and improve your credit score.
Look Closely At How Much Your Car Costs
One of the simplest ways to make sure you’ve got the best possible bad credit auto financing is to start with keeping what you borrow low. Instead of buying an expensive new car, look into buying a used car, or a more modestly priced new car. By limiting how much you borrow, right off the bat, you’ll reduce your overall interest payments and ensure that you’ll get a better deal on financing. The less you borrow, the better the terms will be.
Save Up A Down Payment
A down payment, no matter how modest, can often help you get the best possible poor credit card financing. First of all, it reduces how much you’ll have to borrow, overall, which means you’ll pay less interest and borrow less to pay for your car. Secondly, being able to bring a down payment to the table will open up your options for buying and allow you to choose the car that best suits both your needs and your wallet. And, on another level, being able to bring a down payment to the table will tell lenders that you’re serious, and have the income to make your payments.
Avoid “Payment Shopping”
It’s easy to forget that when you take out car financing, you’re essentially buying credit, and you pay for it through the interest rate. And it might surprise you just how much you pay: Remember, this is a percentage of what you owe, every month, on top of your monthly payment on the principal of the loan.
Many of us simply look at the payment and pick the one that’s the lowest, but in the long term, that can actually cost you money. You should be fully aware of the monthly payment and where it fits in your budget, but make a point of finding the auto loan with the lowest interest rate and the shortest term. In the long run, that will be the loan that costs you the least.
Remember, you can easily secure auto financing, even with bad credit. But it’s up to you to ensure the loan you buy is one you can afford.