If you have bad credit but need a car, you may be wondering what your options are, or maybe you are thinking that you have no options at all. The good news is that even with bad credit, you can finance a car. However, there are a few things you need to know.
You need a larger down payment
With bad credit, you will need a larger than average down payment. Usually 20 percent will do the trick. Lenders will finance a car because the car serves as security for the loan. If you don’t make the payments, the car can be repossessed. However, the car needs to be worth more than the loan, and the only way this can be true is when the down payment is large enough to create equity in the car. With bad credit, plan on saving for a large down payment.
Buying a new car may be possible
You will need a steady job with a verified income, and your credit needs to be fair to poor, but no necessary very bad. This means not having a bankruptcy on your report. However, there are a few things that need to happen. The first is that you need to find the slowest selling, economy car on the market. An economy car means the lowest possible loan required, and slow selling cars a dealership is motivated to make a deal on. This combined with dealer financing and a down payment, and you may be able to buy a new car.
Buying a used car from a dealer
Of course, the situation above is not always available, and the period you will finance a new car will be approximately five years. A used car, on the other hand, will be financed for a shorter period of time. You still have a good chance of getting a used car from a dealer that carries their own financing. This is not necessarily a new car dealership, but you should focus on one of the largest used car dealers. Like a new car, you will have a better chance of financing a car that is not a popular model. A used car dealer is likely to finance a car for a buyer will bad credit if it is a model that isn’t getting much interest from shoppers.
You can also look for affordable car loans on the Internet. The advantage to doing this is that there is a lot of competition, so you will get the best interest rates. You will still need a large down payment.