Many car dealers market financing of car loans to people with bad credit or no credit. Those individuals who qualify for loans could easily get them. However, it is paramount to ensure that the terms of the loan are affordable. Here are some of the tips that can help consumers with low credit scores to purchase a car on loan;
Be Aware Of Credit Scores
Users are advised to find out how much their credit score is before they buy a car on loan. This course of action applies to consumers who feel like they have a low credit score. The information can be retrieved easily from credit bureaus. For example, in Canada, a score of 650 and above is good. Below 650 is the sign of a bad credit risk. Therefore, a person who is in the subprime category, that is a bad credit risk, will be charged a higher interest rate on loan. That is why it is important to check the score
Save A Down Payment
Most buyers get favorable terms when they have a down payment. Having a down payment also favors those that have a bad credit score. A down payment of 10% of the car value is enough to make the terms of payment more attractive. The interest rates will be reduced, making the amount a bit cheaper as compared to those who will be fully financed by the loan.
Those with bad credit scores can establish good faith in simple ways so as to get favorable terms. When doing shopping for the car loan, they can carry around documents like recent pay tubs, the receipts of utility bills and other documents that show the persons’ abilities to generate monthly wages and pay off debts.
Get A Consigner
Trusted family members who have good credit scores can be used as a consignee to get better favorable terms. The financing package will have better terms regarding interest rates and repayment period. The person should go through a credit check and agree to be a guarantor in case of a default in the payment.
Do The Math
In addition to having the knowledge on interest rates, the buyers should be aware of the price range of the cars that they should stick to. The target purchase should be based on the amount that an individual can pay, and from there, it can be broken down into monthly installments. That will be able to finance the loan effectively.