How to finance a car with bad credit
Although there are some situations that arises in which bad credits can occur. When there is bad credit, it does not mean that car buyers can’t but cars again. What you should know now is that there are a lot of buyers with bad credits who drive today by financing the car. And this does not mean they don’t enjoy the conveniences other buyers with good credits have through pre-approval.
READ: What is seller financing
All car sellers are different and getting good plan for the buying of your car could help understand your situation in knowing what is right for the situation. There are some tips on knowing how to get or finance your car with bad credit.
Tips on how to finance a car with bad credit
- Make a proper research you should get to know the type of car you want to finance and you should know that the CFPB (Consumer Financial Protection Bureau) advises and recommended that individual should take a look at their financial situation and consider their financial status including g the credit report, credit score and your financial capacity before financing or buying any car.
READ: How to get into finance
- Know your credit score in your credit report. You should get familiar with your credit report and your credit score as car sellers takes the range of the credit score into considerations and your credit history. All the lenders take into consideration of many things and even your credit score when you want to finance the car with bad credit. As credit score might not be the main thing a lender would consider but it plays a major role in determining if your loan application would be approved and if it was approved, it helps to know the type of interest rate to charge on the car. Your credit score determines your worthiness of credit and also influenced your experience partly in credit; all these are outlined in your credit report. The Consumer Financial Protection Bureau has a copy of the credit report with them in other to check for inaccuracy from the national reporting agency.
- What is your financial capacity? Getting to know your financial capacity will really help you to know how you would be able to finance a car. Auto finance calculator will help you to know how much you can afford in financing a car with bad credit. The budget calculator also helps you to know how a car financing can fit into your personal finance budget. The calculator helps you to place your monthly finances into it and helps to know how much is left to finance any car. The APR, down payment and loan term are able to be known and gives you clue if you would be able to finance a car or not.
- Get to know car loan rate and loan terms better. Loan rate like APR and loan terms are different but mostly used together. APR is the interest rate which is charged on the principal loan and the other transaction fees that were added to the loan. Principal loan is the amount of money that the lender loans to the borrower. One thing you should know about APR is that it will affect your mortgage payment for the car and the total amount you paid for the car in total at year due. There are many criteria that can affect you APR such as your credit score, situations in the market, the interest rate and competition. While the loan terms is the agreements that can include the defaults, time to make the mortgage payment, the finance charge and the interest rate. The term rate can include the amount to be added if the down payment is not made at the right time. Mostly in loan terms, the shorter the loan period, the higher the mortgage payment.
- Getting a co-signer or guarantor or underwriter. A guarantor signs in the application for loan of financing a car. He assures that he would make payment for the car should in case the buyer could not finance the car. A guarantor really helps and has great effect in car financing. A guarantor is mostly requested in bad financing by the lenders or the car seller. The guarantor also provides his own financial statements, credit reports and the credit score to prove he his worthy enough to be of an underwriter for the buyer financing with bad credits.