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Tips on Buying a Car with Poor Credit

Tuesday, December 25, 2012
Image Courtesy of Flickr

The ability to buy a car you need for day to day life can be made more difficult by a bad credit rating. However, there are tips you can keep in mind while trying to buy a car that can help you overcome bad credit and get on the road.

Know Your Credit Score

Always have a clear picture of your credit rating and other financial realities before setting foot in a car dealership. Know how bad your credit score is and what kind of payments you can afford with your current income. Gather pay stubs and tax returns so you can show proof of your income, which can help qualify you for financing.

Research Interest Rates

Have an idea of current interest rates on financing offered by both dealerships you’re going to shop with and banks in your area. Bad credit will mean your interest rate with be higher than what someone with good credit would receive. This does not mean you cannot make an effort to haggle the interest rate down, and the first step is finding out what is, and is not, a fair rate.

Recruit a Cosigner

A friend of family member with a better credit rating can help you finance the purchase of a new car by agreeing to cosign your loan. A cosigner becomes a secondary responsible party for the repayment of the loan, which means your timely payments can have a positive impact on their credit as well. Keep in mind, however, that if you do not make your payments on time your cosigner will be held responsible and suffer a negative hit to their credit report.

Have the Down Payment

Make sure you have enough money saved up to make the down payment on the car you want to buy. Financing options that do not ask for a down payment will often not be available if you have bad credit, or will come with an astronomically high interest rate. Also, dealerships and banks are more likely to approve your loan if you are able to make a decent down payment.

Bad credit does not need to stop you from finding an affordable car you can purchase. Do solid research and know the reality of your financial situation in order to work around your bad credit history.