When the need for a new car arises, it can be a major concern if you have bad credit and no cash on hand to buy a vehicle outright. The good news is that bad credit doesn't mean you can't get a car loan. The following tips will help you improve your chances at getting the financing you need.
Tip #1: Gather all resources
You may not be able to pay for a whole car in cash, but having some money available can improve your chances at financing. Having the ability to put down some actual cash on the car can increase your chances of qualifying for financing. This is because it shows the lender that you have already invested some into the car, which makes you less likely to default. Plus, every little bit less you owe below the retail value of the car makes your loan package more appealing to a lender. You may also be able to include other collateral, beyond the car you are buying, in the loan for the same effect as a cash down payment. For example, if you have second paid-off car, include it as collateral.
Tip #2: Gather your documentation
Sometimes your credit is bad because of hard times in the past, but presently you are doing well. In this case, get the documentation together to show potential lenders that you have changed your ways. For example, not all credit is reported. You may need to gather bill receipts from utilities or other traditionally unreported bills to show that you currently make payments on time. If you have personal loans from family that you paid back, have them write a statement to that effect. Even a letter from your landlord pointing out that you are never late with rent can help your case.
Tip #3: Be prepared to pay
A low interest rate may not be an option if you must opt for bad credit financing. Make sure you are willing to pay the higher interest rate before signing the deal. Further, check that you can buy out or move the loan without penalty later on. After a year or two of on-time payments, you may very well be able to refinance your car for a lower rate. Some bad credit financing companies may even offer a refinance option after a certain amount of on-time payments.
For more help, contact an auto lender or a company like Bay Ridge Nissan today.