Poor credit can make a lot of things challenging, including buying a car. Lenders are often less willing to loan to those with bad credit, and those t
Poor credit can make a lot of things challenging, including buying a car. Lenders are often less willing to loan to those with bad credit, and those that do may offer less favourable terms, making it even harder to boost your credit score and stay out of debt. There are many reasons you might need a car, whether to get to work, take kids to school or for those that live rurally without access to reliable public transport.
If you’re navigating the challenges of buying a car with a poor credit score, there are things you can do to ensure you get the vehicle you need. You will need to ensure you choose a dependable car and be smart with your money and future planning. Here are some of our top tips to help those with poor credit buy a car.
Check Your Credit Report First
It is important to know what you’re working with when buying a car with poor credit. The first thing you should do is check your credit report using a reputable credit score checker. Most credit score checkers will show your score in numerical value along with a rating ranging from poor to excellent or exceptional. Once you know your credit score, you will have a better idea of the types of credit or loans you can take out and what you can do to improve your score.
Identify Areas For Improvement
When checking your credit score, you should look at how you can improve it. Some credit score checkers will include advice and methods for improving your score. Common ways to improve your score include paying bills on time, lowering your credit utilisation below 30% and increasing your credit limit.
If you choose to increase your credit limit, you should avoid the temptation of maxing it out. You should also keep your bank accounts open, as your longest-held bank accounts can improve your score.
Assess Your Needs For A Car
Now you know your credit score and the steps you can take to improve it, you should start assessing your needs for a car. Consider what you will be using the vehicle for and how many people it will need to transport.
Choosing a make and model that will be reliable and cheap to repair and maintain is critical. For instance, if you need a car for commuting and the school run, you should look for vehicles that have space for all the kids and offers good mileage.
Save Up A Deposit For Your Car
Putting down a larger deposit on a car can help open up more financing options for those with low credit scores. Putting down a larger deposit on the vehicle will show lenders that you are responsible with money and will be able to make the repayments on the car. The more you pay in a deposit, the lower your repayments will be, making it easier for you to pay off the vehicle without increasing your financial difficulties.
Compare The Lenders Available
You should always compare the lenders available that may be willing to offer finance for your vehicle purchase. Use a reputable comparison site that offers free quotes and a simplified process. An excellent example is ChooseMyCar which offers comparisons on Bad Credit Car Finance and a full breakdown of the process as well as tips and advice on how to buy a car with poor credit.
Apply For One Loan At A Time
Applying for multiple loans at once can further reduce your credit score and look bad to lenders considering your application. You should choose a loan with care and carry out a soft check to determine if you will be accepted. Comparison sites can be invaluable for checking whether you will likely be accepted without harming your credit score.
Know What Your Monthly Repayments Will Be
When selecting a loan, you should find out precisely what your repayments will be and ensure they are within your budget to pay back. It is crucial to pay your loan back on time to raise your credit score and ensure your vehicle doesn’t get repossessed. Make a budget of all of your income and expenses, including the projected payments for your car loan. Ensure that you can afford these with some cushion for unexpected expenses.
Pay Down Other Debts
Paying down your debts can help improve your credit score and make repayments on your car loan easier. As mentioned above, your credit utilisation should be 30% or lower. It may also help consolidate your debts into one loan, making it easier to manage and repay. Look for a suitable loan and ensure you don’t take on a loan that offers worse terms than your current debt obligations.
Look At Used Cars
If your credit score is poor, it is a good idea to look at cars that will be more affordable. New cars depreciate in value rapidly in the first few years, so buying brand new is not always a sound investment. Instead, look for used cars a few years old, with good service histories. Avoid choosing any vehicle that is too old that may require frequent repairs. If possible, get the car looked over by someone with mechanical knowledge to ensure your used car is in good repair.
Find A Guarantor
A guarantor can help you buy a car on finance by personally guarantying your loan with a lender. This can lead to lower interest rates and better terms on the loan. This should be undertaken with care from you and your guarantor.
If you default on the loan, they will be expected to continue making payments on your behalf, so you should choose someone you trust who has the funds available to make payments. Naturally, you should avoid allowing the loan to fall to your guarantor at all costs.
Buying a car can be essential for various reasons, and doing so with poor credit can make the process much more challenging. However, it can be done with some careful planning, attention to detail and the right lenders. You should ensure you work on improving your credit score so that large purchases will be easier to manage in the future.