If you have a low credit score, that doesn't mean that you can't get a car loan. It just means that your car loan is not going to look as great as the deals that you see advertised on television. However, there are still things that you can do to control your loan so its affordable. That's why they offer auto loans for bad credit.
Save Up For A Down Deposit
The first thing you need to do if you have a low credit score is save up for a down deposit. The more money you have to put down on the vehicle, the better you will look to your bank. Having a healthy savings account can help offset your low credit score. Being able to put down a healthy down deposit will also help reduce the amount of money that you take out for your auto loan. Taking out a smaller loan could help you negotiate better repayment terms.
Ask For Shorter Loan Terms
Oftentimes, when you have a low credit score, loan providers will offer you a longer loan term. For example, for a $5,000 loan, instead of offering you financing for 36 months, they may offer your financing for 72 months instead. They may present it as an opportunity for you to build your credit with a lower monthly payment over an extended period of time.
However, the truth of the matter is that an identical loan for $5,000 with a repayment term of 72 months instead of 36 months is going to cost you more in the long run. You are going to pay more interest on the loan over the extra three years that the loan is being financed over. Getting a shorter loan term will reduce the amount of interest that you ultimate pay on the total loan amount.
Make Sure There Is No Early Payment Penalty
Finally, make sure that your loan does not come with a penalty for paying off your loan early. Even if you end up with a loan with a high-interest rate or really long loan terms, you can always reduce the amount of interest you pay on your loan by paying your loan off early. The best way to do this is by making more than your monthly payment each month. For example, if your loan payment is $150 per month, but you could really afford to pay $300 per month, doing this over the lift of your loan will cut off more than half the life of your loan and save you a significant amount of interest.
If you have a poor credit score and need a car loan, make sure that you are able to put down a decent down payment, ask for shorter loan terms over longer loan terms, and make sure that there is no early payment penalty associated with your loan so you can pay it off early.
It is never easy to think about investing boatloads of money into a new vehicle, but a few years ago, I found myself doing just that. I had dealt with a dying car for so long that it was hard for me to imagine having a car that worked well, but before I knew it, things were really coming together. I was able to work with a friend of mine to find a vehicle that worked just as well as it said it did, and to make matters even better, it held its value well. This website is all about getting the price of a car down when you want to buy one.