If you’re about to start your car buying process, it helps to know some tips for buying a car with bad credit. Most car loan providers that you find online are targeting people with great credit and simple income profiles.
These “lenders” are not actually lenders but marketing companies that capture your personal details and share it with lenders who try to get your business.
While competition is good, the lenders that advertise online are offering you retail car loan interest rates, we want to show you how to access wholesale rates but first, there is some work you need to do. We’ve prepared 3 useful tips for buying a car with bad credit, and we hope this makes your experience quicker, and maybe you’ll save some money!
Accessing your credit report
The initial step is accessing your credit report by visiting Equifax and TransUnion. Once you have your free credit reports, you should scan it for any accounts that are past due, delinquent, or have gone to collections. Having an account in collections is going to hurt your chances of getting a competitive car loan, most lenders will not approve a new loan if you have an account that is in collections so you must pay that off ASAP.
While you are working on fixing your credit issues, you also need to take a moment and understand why you missed the payments. Did you miss the payments because of the pandemic? Or was it a divorce or illness that prevented you from making the payment? When you have identified the root cause you can make sure it won’t happen again.
Prospective lenders will want to understand why you have a low credit score, having a rebuttal shows you are taking responsibility which helps increase your chances of having the loan approved.
Importance of having a stable income
Even if you had a perfect credit score, prospective lenders need to know if you are making enough money to cover your current obligations.
Since the onset of the Covid-19 pandemic, lenders have become very conservative, even with interest rates at all-time lows. No one wants to have a non-performing car loan on their books so lenders are very strict when it comes to income verification. You will need to produce your pays lips and your income tax notice of assessments.
How to access bad credit car loan providers
The lenders that you see advertising online are not able to give you a bad credit car loan, those advertisers focus primarily on people with a 620 credit score or higher. If you really have bad credit, the only way you can get a loan approved is by going through a dealership in your area that specializes in this type of financing.
You will be able to find these dealerships by looking on their website and noting whether they specialize in 2nd chance credit. The dealership is able to help you get a car loan and they can show you how to improve your credit score.
There is a shortage of new and used cars that is driving up car prices so you should contact your local dealership soon and book an appointment. If you wait too long, you may not be able to buy a car at all!
These were our tips for buying a car with bad credit, we hope this helps! For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!