by You’ve surely heard that bad credit can stop you in your tracks when you’re looking to buy a new expensive asset. But, it’s not the end of the world if your credit history is not pristine.
This is especially true when it comes to getting a loan to buy a car.
Here are some tips for getting a car financed despite bad credit:
1. Don’t Be Dishonest
Credit providers are able to check your credit history. So there’s no point lying about it.
This will most likely lead to financers viewing you with even more hesitation than if you had just been honest.
Car financing for those with bad, or subprime, credit is a growing industry, so there’s no need to lie about it.
You can even look for companies which specifically cater for those with bad credit. But make sure they aren’t ripping you off with ridiculous rates.
2. Work Towards Improving Your Credit
Confused.com suggests that those with bad credit who want to have a car financed should immediately start improving their credit history.
This means that you should start taking out small debt amounts and repaying them timeously to show creditors that you are less of a risk than expected.
Small things like using a credit card and repaying on time, or taking out an account at a shop and (again) paying back everything, can show creditors that you are reliable.
If you want to see how bad your credit is, you can request a credit report. This will help you find out what you specifically need to work on.
Improving your credit score will mean that you will get lower rates for car financing. It will also increase the chances of a creditor granting you a loan.
3. Consider Rent-To-Own Plans
More financers are offering alternative options for people with bad credit. Auch as rent-to-own plans.
This is, essentially, a rental in which your payments go towards buying the car. Often, the cars available are pre-owned rather than new.
However, these plans come with risks. So you’ll want to fully understand the scope of your agreement with a company before you sign up.
Also make sure that you choose a reputable company.
4. Shop Around
Different credit companies have different criteria when assessing the risk of a customer. While you may be considered sub-prime by one bank or company, another might give you the benefit of the doubt.
Therefore, shopping around will help you get an idea of the kinds of rates you can expect on average, BankRate.com says.
Again, you’ll want to do your research so that you don’t take out a loan from a dodgy company.
But, make sure that you weigh up different options to see who provides the best rates and terms on your loan.
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5. Get a Guarantor
While many of us hesitate to ask for help from others, sometimes your needs will outweigh your ego.
If you are truly struggling to get a car financed, you may need to find someone who trusts you and can act as a guarantor.
Having a guarantor means that lenders will view you as less of a risk, thereby increasing the likelihood of you getting a loan. A guarantor is essentially the “back-up person” if your repayments fall through.
Getting a guarantor shouldn’t be taken lightly though – it is a significant responsibility.
You’ll need someone who will be able to survive the burden if something happens with your repayments. Therefore, choosing someone who is also struggling with debt and credit would not be a good idea.
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