Can I buy a new car with bad credit?
If this is the question on your mind, two things are clear: you want a new car loan and your credit history is in the red.
There’s no straightforward way to answer this question. It can be yes and it can be no. It all depends on a wide range of factors.
We’re here with the information you need. Continue reading for deeper insight.
Can I Buy a New Car with Bad Credit?
Yes, it’s possible to buy a new car when you have bad credit. There is a simple reason behind this.
You see, having bad credit doesn’t necessarily mean you don’t have the money to get a new car loan and service it without any problem. Bad credit just means you’ve recently made some financial mistakes, such as defaulting on a loan, running a high credit utilization ratio, and even being late on your utility bills.
These mistakes hurt your bad credit, making it fall below the minimum score for getting approved for an auto loan.
Two, your credit isn’t the only factor that lenders need to determine whether to lend you money. It’s a big factor, sure, but so is your income. If you recently got a job that pays highly, your credit score won’t move from bad to good overnight. It will stay in the red zone until you take steps to rebuild it, but you’ll also have the money to pay for a car loan.
If you’re in this situation, most lenders will approve your loan, but there will be a price to pay: high interest rate.
The national average interest for an auto loan is about 5 percent. But if you’ve got bad credit, expect to be slapped with a double-figure interest rate.
It’s also possible to de denied a loan for a new car when you have bad credit. If you’ve got no income at all, don’t bank on getting an auto loan, let alone any kind of traditional loan.
The Steps to Take When You Want a New Car Loan with Bad Credit
When you’ve bad credit and you want a new car loan, it’s important to know how to go about the process. If you don’t follow the right steps, you could walk right into a loan rejection or secure a loan that’s overly pricey even for a person with bad credit.
Here are the steps you should follow:
Know Your Credit
Yes, you have bad credit but this isn’t the only information you need to know about your credit. What’s your exact credit score?
Knowing your score helps you gauge how bad your credit score is. For example, a bad credit score is anything between 580 and 670.
Does it matter if your score is just below 670 or just above 581? It’s both bad credit after all, right?
Well, you’re right, but in the eyes of lenders, these scores aren’t the same. It’s possible to find a lender whose minimum score for a car loan is 650. So, if your score is 660, you might sit there thinking that there’s no lender who will look at your credit report twice.
Plus, if your score is close to 670, it’s possible that you could have an error on the report. Fixing this error can be all you need to jump from bad to good credit and you’ll no longer worry about the consequences of having bad credit.
As such, get a copy of your credit report and study it. Considering that about 80 percent of all credit reports have a credit-altering error, it’s vital to read through the lines and establish whether you have any errors. If there’s, file a dispute with the credit bureau that issued the report.
Your Choice of the New Car Matters
Buying a new car comes with benefits that you wouldn’t get in a used car. For instance, you’ll be the first owner, so you won’t worry about the car’s mechanical and maintenance history. New cars also come with better and safer automotive and infotainment technology.
That being said, new cars are pricey. The average cost of a new car is $40,000.
When you’ve got bad credit, you don’t want to go in for a pricey car. You’re already applying for a loan from a point of disadvantage, so you don’t want to give your lender any more reason to reject your application.
Know your limits. When your credit is bad and your income isn’t solid, you want a cheaper new car. Regardless of the model you want, you’re bound to get new cars at every price range. Even new chevy models come at different price points.
Choose Your Lender Wisely
Lenders aren’t created equal. They have different auto loan requirements.
Lender A can reject your application while lender B can approve it. Lender A can offer you 10 percent interest while lender B can offer you 7 percent.
You, however, don’t want to try your luck with different lenders. This will hurt your score even more since lenders typically perform hard credit checks.
Research various lenders. Call in and ask about loan requirements and interest rates. With this information, you’ll be in a better position to choose the lender who’s most likely to approve your new car loan.
You Can Get a New Car Loan with Bad Credit
Can I buy a new car with bad credit?
The short answer is yes, but getting the loan won’t be that simple. There’s a lot of groundwork you need to do before you can make an application; otherwise, you won’t get the loan. This article has fleshed out all the information you need to improve your approval chances.
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