Buying a car is often a necessity for many families. People who commute to work and school need a vehicle that is reliable and affordable to drive. What most drivers do not understand is how bad credit really affects car loans.
People who have bad credit often have a hard time getting a car loan. Depending on your situation you will need to research your options and consider whether you should buy a new or used car. While most people think it is best to buy a used car if you have bad credit, you might actually get a better deal on a new car.
If your bad credit is due to a one-time situation like divorce or medical bills, you may now have money in your budget for a new car. These vehicles provide a great collateral risk in comparison to a used car that may break down before the vehicle is paid off.
If you know you cannot afford a new car, check into your options for obtaining a used car loan. You may want to deal with your local bank and have the payments debited from your checking account. Another option is to go with dealers who specialize in bad credit financing -- or you may need to think about a "buy here pay here" car dealer that provides its own high-interest financing for the cars on the lot.
If you have bad credit you will pay higher interest for your car. To make sure you don’t end up paying too much, check your credit before you begin the process of looking for a car. You need to know exactly where you stand with your credit and make sure there are no mistakes on the report. If you can, pay off some of the problems on your credit before trying to get a loan. Shop around and find financing available for someone with your credit score. If you can get pre-approved for a car loan it will make the negotiation process much easier.
Once you have obtained financing for a car loan, make sure you make your payments on time. A car loan is a great way to rebuild your credit, especially if you are thinking about buying a home in future. Most lenders want to see on-time payments and a reasonable debt-to-income ratio. So, if you have bad credit make sure you can afford the payments and then enjoy driving your car and increasing your credit score.
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