Most people would agree that car shopping is not a fun experience. The most noted reason being is that people do not trust dealerships. The relationship between consumer and car dealer has been strained for decades. Hence, the car buying experience is fraught with mistrust. It is even worse if you are car shopping and have bad or bruised credit.
Tip #1: Knowledge is Power
It is very important to do your research before shopping for any loan not just a bad credit car loan. Be equipped with a good understanding of things like how subprime loans work, subprime interest rates and how car loans can affect your credit. It is also important that you know your own credit picture. You don’t want to take a dealer’s word for it and get stuck with a loan that’s worse than what you deserve.
Also, remember that your credit can take a hit when lenders check your score. Minimize this by limiting your shopping to a two-week period.
Tip #2: Not all Lenders are Equal
As you may have noticed there are many bad credit auto loan lenders these days. All are vying for your business. Many of them focus on used cars. Check the credibility of the lenders you are looking at. See what companies they belong to as many of them are not stand alone lenders. Take a look at the better business bureau, online reviews and social media. Understand that the interest rates you can get from different lenders will definitely vary.
Remember, even though bad credit will exclude you from prime interest rates, it won’t shut you out of the car-loan game entirely. It’s far easier to get decent auto loans for bad credit than mortgages or other large loans, so you’ll still have a good number of options.
Tip #3: Variety of Loans
It is common for bad-credit lenders to focus on used cars, but the best lenders allow for both new and used loans.
Tip #4: Bring a Friend
It is easy to say, “yes” to anything the dealer throws at you because you are in a vulnerable position. A good friend can help you keep your wits about you, acting as a voice of reason when you’re offered unnecessary add-ons that will add to your loan. He or she can also be a watchdog against scams, which more commonly target bad-credit buyers.
Tip #5: Shorter Term Loans
Keep your eye on the total cost of a vehicle instead of only looking at the monthly payment. It is very common for dealers to offer you the lowest possible payment in order to get you to agree to a longer-term loan that makes them more money. This may not always be the best option for you.
Tip #6: Avoid Corner Lots – Everyone Approved
They say they’ll do business with anyone, no matter how bad your credit, and that’s mostly true. But you may be stuck with a long-term loan with a very high interest rate (often starting around 20%) on a used vehicle with a lot of kms on it already. You do not have to do business with these companies.
Tip #7: Extra’s
Be extremely cautious if the lender you are working with says you must purchase extras to get a loan. These may include extended warranties or expensive insurance add-ons.
APPLY FOR YOUR CAR LOAN