There are jokes that you can’t get credit when you need credit. If you can’t qualify for a mortgage, renting is typically an option. However, many of us don’t have an alternative to owning a car, leaving us with few options other than hunting for the best car loan in addition to finding a decent car. Here are a few tips for finding a good bad credit card loan.
Do Your Research on the Market
It doesn’t matter how low the interest rate is on the loan if you over-pay for the car. The best way to avoid being overcharged on a product is knowledge about the going rate. How much does a new or used vehicle like the one you want typically going to cost? What are the commonly available discounts? For example, how much would a one or two year old car traded in on a lease going to cost relative to the same model new? How much cheaper is a somewhat used car with 20,000 miles on it than a vehicle that hasn’t been driven except for test drives? On the flipside, if you can find a cheaper compact vehicle or used vehicle, the lower overall loan balance could save you money on the interest rate when you seek a loan. Furthermore, the cheaper car means you have a lower debt to income ratio than if you bought the most car you could afford. This makes it easier to get approved for a car loan in the first place, even if you have bad credit.
Research the Lenders, Too
The expected cost of the car is one factor. However, there are other costs in this equation. You’ll have to pay a variety of fees to purchase the car, and car lots may tack on a lot of fees to maximize their profits. Others sell unnecessary extras like extended warranties, after-market products and last minute gimmicks. Yet more lenders may offer an affordable vehicle and low fees, but they make up for it with a high interest rate on the loan or extended loan term that costs you far more than you think. This Ottawa bad credit car loan provider offers reasonable loan terms and a relatively low interest rate though you don’t have perfect credit.
Know How Your Credit Affects Lenders’ Views of You
Understand how your current credit score and payment history affects lenders’ views of you. For example, if you had bad credit in the past but are slowly cleaning it up, creditors will probably be willing to take a risk and loan you money for a vehicle. If you were late on your last car payment, they probably won’t. If you have a bad credit score because of a bankruptcy and business failure, be able to explain how you started a new, regular job and therefore can be expected to make your car payments. Another factor in this is your overall trend. Are you making all of your payments on time and in full? Are you paying your debts down, or is your overall debt load increasing? Someone who is reducing their debt to income ratio and has a clean payment history will probably be approved for a new loan over someone who is struggling to pay for their current obligations. At the same time, avoid mistakes that will hurt your credit when the auto lender checks your credit report, such as taking out payday loans or opening new lines of credit. If you have this information, you can clean up your credit and present yourself as a relatively low risk prospect to the lender. Then you’ll get a lower interest rate and fees on the loan.
It is possible to shop around for the best car lender just as you can shop around for a new or used vehicle. Take the time to do your due diligence, because it will save you a lot of money over the long run.