Tips on Buying a Car if You Have Poor Credit
Anyone with poor credit will tell you that searching for and buying the right car can be quite an undertaking.
There are plenty of lenders out there who are willing to work with people in this situation, but there are just as many predatory lenders who take advantage of those with limited buying power. Protect yourself by knowing your credit score, keeping yourself abreast of market rates, asking questions and working on your negotiating skills.
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Don't Go Overboard
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Money talks!
If you have poor credit, it may not be the greatest idea to pick a brand-spanking-new BMW or Mercedes Benz. Practicality, in this situation, must prevail over the glitz and glamour of fancier rides. The right car, with the right financing, will afford you the opportunity to rebuild your credit (with timely monthly payments, of course). An overpriced car means higher monthly payments and costlier parts. It will end up doing more damage than good to your credit score in the long run, so avoid the headache altogether.
Save Money for the Down Payment
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Do your homework.
We all know that money talks, and this is no exception. If you are a great negotiator, you may very well be able to work out a deal with the financier in which you put no money down on the car. In most cases though, because your poor credit makes you a more risky buyer, your ability to make a decent down payment will give you leverage in bargaining for the best options. In most cases, you'll also need to prove that you already have consistent employment. After all, the loan company wants to ensure that you will have no problem repaying the money you've borrowed.
Check Interest Rates
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Don't get duped!
As with any loan, the problem with paying the money back is not found in the principal. It is those outrageous interest rates that often leave you paying back two to three times the original cost of the car. Particularly when your credit score is low, financiers penalize you by offering interest rates as high as 20 percent. Be ready to use your finagling skills to bring that number down to a more reasonable rate--something to the tune of 10 percent or less.
Get a Reliable Co-Signer
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Ask questions.
A co-signer offers extra collateral that you would otherwise be unable to provide by yourself. This person signs the contract agreeing that in the event you are unable to make payments for whatever reason, she will step in on your behalf. Make sure, though, that you are listed as the primary payer, and that the co-signer is listed as secondary. While timely payments will help improve both of your credit scores, missed payments negatively affect both parties involved.
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