Need New Wheels? Don’t Let Bad Credit Stand In Your Way
(ReliableNews.org) – Whenever someone wants to borrow money from a bank for anything from a house to a car, the lender will check the person’s credit score. This important number lets the bank know what kind of risk they’re taking by loaning out money. The lower the score a person has, the bigger the risk the bank is taking that it may either never see repayment or have trouble recouping its costs. A low score can make it difficult to get a loan, but not impossible. For those who need a car but don’t have stellar credit, there are still options.
Purchasing a Car
Even if the borrower is unsure of their credit score, it’s best to know ahead of time to avoid surprises. Anyone can check their report for free once a year, with no impact to the score. FICO credit scores range from 300 to 850, and a poor credit score ranges from 300 to 579. The higher up the scale, the easier and more affordable it will be to get a loan.
If a person’s credit score is low, but they need a car right now, there are specific steps to follow. First, turn to the internet and shop for banks and credit unions online. Interest rates for loans vary by institution, and some organizations might be more willing than others to work with people who have low credit scores. To ensure the best deal, search around and find a few banks. Be sure to check for fees, don’t just rely solely on the posted interest rate.
Next, contact the regular bank you use every day. Since it’s familiar with you and has some of your funds already, they may be in a position to give you a chance with a loan. They might even be willing to work with you on getting a decent interest rate. Remember, you can always refinance the loan later when you build back your credit. Your first focus should be getting the best rate you can get now and buying the car.
More Options
If a buyer doesn’t find anything reasonable using these options, it’s best to go directly to the dealership. Many dealers will offer financing to everyone, even with lower credit, to secure the sale. However, the rate may be high to compensate for the risks, so be sure to read the fine print on any documents before signing to make sure there are no hidden fees.
Another option to consider is finding a friend or relative willing to cosign. That person will sign on your loan as an extra assurance to the bank that it’ll receive the payments. Make sure you make payments on time, though, because you run the risk of ruining not only yours but their credit as well.
If none of these options work for you and you don’t absolutely need a car right away, think about waiting and working on your credit instead. Raising your score will allow you to return at a later date and receive a friendlier and more affordable deal.
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