It used to be that if you didn’t have stellar credit or a co-signer, you wouldn’t be able to obtaining financing for a car. But these days, this old-fashioned way of thinking — and doing business — is no longer quite so common.
Changes in the economy have led vehicle financing companies to realize that even the most frugal and organized among us can slip up financially, leading to blemishes on our credit reports and the lowering of our credit scores. And while you should do your best to correct past financial mistakes and change your way of doing things so you aren’t doomed to repeat them, the good news is that even with not-so-stellar credit, you can get financing for your next vehicle.
Bad credit loans and other types of financing for vehicles is a possibility for most car shoppers. Of course, even if you are able to obtain financing for a vehicle purchase, keep in mind that a bad credit loan may require you to pay more each month, and have a higher interest rate, and you may even need to put down a bigger down payment. So with that said, here are five tips to keep in mind when shopping for a car:
- Determine your monthly income and expenses, and figure out what you can safely afford to spend on a monthly car payment. Ideally a car payment shouldn’t eat up more than 20% of your monthly income.
- Since you may be dealing with a loan with a higher-than-average interest rate, try to look at vehicles whose monthly payments would be down to about 15% of your monthly income – this’ll give you a bit of wiggle room.
- Tell the auto dealership right away that you have bad credit. They can get started with documents and finding appropriate lenders, and they may even have suggestions on specific vehicles to consider.
- Have a down payment available, or be sure to obtain one ASAP. If you have a current vehicle to trade in, find out if it’s worth trading in.
- Shop around. If the first dealership doesn’t have vehicles that interest you, move on to another.