How to Buy a Car with Bad Credit: A step-by-step guide
There are a few things you need to do to prepare for the process and increase your chances of getting approved for a loan. In this article, we’ll walk you through the steps you need to take to buy a car with bad credit.
Check your credit report
The first step is to check your credit report and see where your credit score stands. This will give you an idea of what kind of interest rates you can expect to qualify for.
Access to your report can be granted free every three months through a credit reporting agency - Equifax (PH: 138 332), Experian (PH: 1300 783 684), illion (PH: 1300 734 806).
Your credit report includes things like your credit rating, credit products you held by you, and your repayment history. Credit providers use this to investigate your credit history and decide whether to lend you money.
If you find any errors on your credit report, you can dispute them with the credit reporting agency. This is a free service.
It’s important to do this before you start shopping for a car, so you can make sure the lender is looking at the most accurate information. If you are planning on using a car finance broker, he/she will be able to assist with this process.
Use a car loan calculator to work out your budget
Once your credit report has been dealth with, it's time to figure out how much car you can afford to buy. A car loan calculator is a great way to figure out your budget and what kind of interest rate you can expect to pay.
To use a car loan calculator, simply enter in the price of the car you want to buy, the down payment you can afford, the length of the loan, and the interest rate. The calculator will then give you an estimate of your monthly payments.
Keep in mind that this is just an estimate - actual payments will vary depending on the lender and the terms of the loan. But a car loan calculator is a valuable tool to use when you're trying to figure out your budget for a new car.
Our car loan calculators include amortization charts so that you can see what is happening to the loan balance and the interest that you are paying over the term of the loan.
Get pre-qualified for a car loan
Once you know what you can comfortably afford, and where your credit stands, you can start the process of shopping for a loan.
The best place to start is by getting pre-qualified for a car loan. This means a lender will give you an estimate of what you’ll likely be able to borrow, based on your credit score, income, and other factors.
Getting pre-qualified is a quick and easy way to find out how much you can borrow, and it can be done online in just a few minutes.
It’s important to compare offers from multiple lenders to make sure you’re getting the best deal. A specialist car finance broker will know exactly which lenders are available to applicants with poor credit and will help compare the available rates & options.
Find the right car
Now it’s time to start shopping for the right car. It’s important to remember that you may not be able to get the same terms as someone with good credit.
For example, you may have to put down a larger down payment, or you may be limited in the types of cars you can finance. But don’t let that discourage you – there are still plenty of great options out there. You can start your search by visiting dealerships in person, or you can browse online.
Negotiate the price
Once you’ve found the right car, it’s time to negotiate the price. This is where your research will come in handy. You should have a good idea of what the car is worth, so you can be confident in your negotiating.
Remember, the sticker price is just a starting point. There’s usually wiggle room, so don’t be afraid to ask for a lower price.
If the vendor is desperate to make a sale, you may be able to get a substantially better deal.
Get the financing you need
Now it’s time to get the financing you need to buy the car. If you’ve been pre-qualified for a loan, you’ll already have this under control. Otherwise it’s still important to compare offers from multiple lenders to make sure you’re getting the best deal.
When you’re comparing offers, pay close attention to the interest rate and the terms of the loan. These can vary widely, so it’s important to find the best offer for your situation.
Drive off in your new car!
Once you’ve found the right car and finalised the financing, it’s time to drive off in your new vehicle!
Just remember to make your monthly payments on time and keep your car insurance up to date.
Congratulations – you’ve just bought a car with bad credit!