Nowadays,
owning a car is not only a symbol of freedom and independence, but a necessity
for everyday life. Despite its importance, however, reports are saying that
buyers are finding it hard to get loans to purchase cars. Even worse, people with bad credit are having a tougher time when
they apply for loans due to the higher prices of vehicles today. Add
to that the mistakes uninformed buyers often make, and it’s almost too
difficult to get a new ride.
Still,
car ownership is not entirely impossible. You just have to be aware of the
financial pitfalls when applying for bad credit auto loans.
Going Over the Budget
If
there’s one thing auto dealerships will often remind you of during the buying
process, it’s that you should only buy what you can afford. Be realistic about
your financial situation and ask your dealer’s help to find a car that will
match it. Set a price range for the loan and the monthly car payment, and make
sure that what you have left over will allow you to still live comfortably.
Skipping Pre-Approval
Too
often, people with poor credit assume that getting pre-approved would do little
to help them because of their already dire situation. You’d be surprised at how
much more helpful a pre-approval letter is when you walk into the showroom. The
pre-approval process analyzes your income, expenses and credit score, allowing
you to learn exactly how much you can borrow. This way, you would know how to
avoid deals with an interest rate higher than what you can afford.
Selling the Old Car
Don’t
be quick to hand off your old sedan to just any buyer who comes along. You
might get more use out of it to help you with financing your new car. Provided
that your car is in good condition and considered to have a fair value, you can
trade it in instead. Some dealers will accept trade-ins to help bring down your
initial down payment. But don’t rely solely on trading in if you want to make
monthly payments lighter on your wallet. Putting down as much money as you can
will go a long way in paying off the loan.
Settling for Used Cars
If
you’re buying a car on less than stellar credit, you might as well get a new
one. Many people might not know it, but loans for pre-owned vehicles tend to be
more expensive. You also have to take into account the future maintenance costs
of a used car. You should not completely dismiss this option, though. If you do
find a good deal on a used car, at least consider adding it to your shortlist.
Getting a Long-Term Loan
You
might think getting a long-term loan is thriftier, but it’s actually quite the
opposite. Loans with longer terms usually come with a higher interest. A
shorter-term loan is a wiser option if you want to save money. Generally,
anything you can do to pay off the loan quicker is good. Don’t be reluctant to
make additional payments when possible so you can reduce interest.
Buying
a car with poor credit can certainly be challenging, but making smart decisions
will help you. Working with a reputable dealer also simplifies the process.
About McLoughlin Chevrolet
McLoughlin
Chevrolet is a Portland and Milwaukie-based car dealership serving the Oregon
area. We offer a wide variety of brand new and used Chevy and GM cars. We also
have financing professionals that can assist buyers in finding their ideal
vehicle.
Sources:
How to Buy a
Car With Bad Credit in 2017, Credit.com
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