We list the steps to increase your chances of getting a loan.
You need to buy a car. But your poor credit worries you. Well, don’t worry because people with bad credit still get car loans. It may seem challenging, but there are steps you can take to improve your chances.
Check and Try to Improve Your Credit Score
Before you apply for a loan, get a free copy of your credit reports. The reports and scores will let you know how good or bad your credit is. If you don’t need a car immediately, start working on improving your credit score. This will help you get a lower interest rate and better terms. Here’s how to do it:
– Pay all bills on time and clear any missed payments or any accounts that may be in the collection.
– Reduce debt as much as possible, so your credit utilization ratio improves. The ideal level for the ratio is under 10%, but under 30% should also do.
– Study the report, and if you find any errors, get them corrected immediately as these errors will bring down your score.
– Use tools like Experian Boost that allows you to improve your score by adding utility and phone bills to your credit file.
There are lenders that are focused on providing loans to people with poor credit. These loans will have higher interest rates but will help you out in case you need a car loan in a hurry. There may also be car dealerships that work with people who have bad credit. They may finance your loan themselves or work with lenders who offer loans to people with poor credit.
Save for The Down Payment
If you can put down some money as a down payment, you could reduce the amount you repay per month. You may even be able to negotiate a better interest rate or reduced term. A down payment is an advantage you should utilize fully, especially if you have poor credit. If you’re not in a hurry, start saving now.
Only Buy What You Can Afford
Calculate your monthly payment in detail. Understand the duration for which you will have to make these payments. And only go for a payment amount that you can afford. Don’t stretch your budget at all because it will hurt you in the future.