When you don’t have a lot of money and want to purchase a car, it can be difficult for bad credit. Whether your score is low or you have derogatory marks on credit, this can make it hard to finance a car. Luckily, there are a few things you can do to improve your credit before you go to make a purchase and other ways to get some money together to make a down payment. Taking a chunk off of what you use is important, but there are many facets to purchasing a car with bad credit. Continue below to find more methods to buy a car with bad credit.
Consolidate Your Debt
If you have debt and want to purchase a car, you should first consolidate whatever you can. Debt consolidation is the process of taking all the various money you owe to lenders and setting up a single monthly bill that has a lower interest rate. When you put all your debts into a single place, you will be able to pay off the money you owe that has high interest rates. Working with an experienced debt consolidator provides a way for you to cut down on your bills and improve your credit for when you buy a car.
Don’t Make Minimum Payments
As you ramp up to a new car, you should definitely not be making minimum payments. If you make the minimum, your interest will go up and you will have to pay more than you would if you made larger payments. When you fail to make big payments, you will end up being deeper in debt than you realized. Do you have a large balance? Get your payments scheduled so that you know when you will be done with your credit bills. That way, you can plan your car purchase around your debt expenses.
Agree to a High Interest Rate
Then, when you go to purchase your car you should be ready to agree to a high interest rate. As you pay off your high interest rate debts, you will be able to increase your score. Still you will likely have to pay a steep rate when you want to purchase a new car. It depends on what kind of car you want to buy, but the more expensive the vehicle the more you will have to pay. It begins to compound. The more you borrow, the higher your interest. It will make the loan cost substantially higher. Whatever car you’re looking at, you should be ready for a high interest when your credit isn’t high.
Apply with a Co-Signer
Another way to finance a car when you have bad credit is to apply with a co-signer. A co-signer is someone who trusts you, like a family member or friend, who is willing to use their credit to give you a better interest rate. If you apply with someone who has great credit, it will be much cheaper and more reasonable for you. It should go without saying that it will negatively impact their credit if you don’t pay off the debt as soon as possible. If you’re unable to make the payments the co-signer will have to pick up the tab. Still, if you can make an arrangement with someone, this can be a great way to finance a vehicle and make it easier to pay off.
Finance with a Private Company
Finally, if you work with a private company to finance a car you will be able to get one for cheaper. Since private companies are less worried about your credit than banks, they can provide better loan rates and options for financing. Simply applying for a car finance plan with a private company can be the key to getting in a car that you can afford for cheaper than you would get it with a traditional loan or credit score.
Purchasing a car with bad credit is never easy, whether it’s new or used. It can feel almost impossible to finance a vehicle with bad credit, but there are plenty of options. The first step is to pay back as much as you can, which will lower your interest rate on a car. Then you should think about applying with a co-signer or working with a private company. The bottom line is, don’t fear. You can have options for financing a car.