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How to Buy a Car With No Money Down and Bad Credit
No matter how it happened, you may find yourself dealing with a low credit score. A low credit score can make it difficult to purchase a car. By working to optimize your credit and improve your overall standing, you can put yourself in a better position to purchase a car with no money down. Furthermore, by exploring a variety of financing options, you can improve your chances of getting the car loan you seek.
Try to get a loan through your credit union.If you already have an account at a credit union, it is a good idea to inquire there about loans first. Credit unions are generally more lenient with their qualification requirements than other banks, especially in regards to their members. If you are not a credit union member, join a credit union and ask about auto financing for problematic credit.
- In order to open a credit union account, you will need a government issued I.D. and a minimum deposit. This amount will vary by credit union, but may be as low as .
- Once your account is open, speak to a loan representative about auto financing options.
- They will likely be able to tell you that same day whether or not you are approved and for what amount.
- Bring your loan approval letter to the car dealership, who will deal directly with the credit union.
Seek out a loan through a dealership.Find an auto dealership that specializes in used cars and bad credit financing. These are often referred to as "buy here pay here" lots. This type of dealership may approve a car loan for you with little to no money down, but be prepared to pay a high interest rate.
- Many of these dealerships can approve you over the phone. They can also sit down with you in person.
- You will need to verify your identity by providing a social security number, birth date, and other information (such as previous addresses).
- It is a good idea to call and see if you are approved before you begin shopping for cars.
Explore loan options through “sub-prime lenders.” “Sub-prime lenders” specialize in loaning money to those with damaged credit. An Internet search will return numerous sub-prime lenders, and you can often fill out an application online and have an answer within minutes. Once again, be prepared to pay a high interest rate.
- You will need to provide identifying information such as your social security number, birth date, and previous addresses.
- You should be able to apply for a loan and be approved within 20 minutes.
- Bring your loan approval letter to the car dealership, who will deal directly with the sub-prime lender.
Get a cosigner.If you are not approved for the car loan on your own, another option is to get a family member or friend to co-sign. This means that the lender (the credit union, dealership, or other lender) will consider that person’s credit score alongside your own. This can be a good way to get a loan, and as you make payments, improve your credit score.
- This can be done through almost any lender (credit union, dealership, or sub-prime).
- If you are not approved for a loan through any or all of these channels, speak to them about getting a co-signer.
- You will then need to discuss this with your family member or friend.
- You co-signer will either need to appear in person to sign the paperwork, or submit identifying information online and signatures.
Research auto loan rates.Knowing the most common loan rates will help you avoid getting blindsided by someone wanting to charge you an interest rate that is too high. Do some basic internet searches to determine the going interest rates for different types of auto loans, and use this information to bargain with your lender.
- These rates vary by location and change regularly.
- Perform an online search for "average car loan rates in [your zipcode]."
- Typically, loans spread over a longer period of time may have lower interest rates. However, as you will paying the loan back for longer, the interest will add up over time.
Shop for your loan before you shop for a car.Before you begin to look at cars, work on getting approved for a loan. Once you know the amount you have been approved for, shop for cars that fit this budget. You don’t want to fall in love with a car on the lot only to find out you can’t afford it.
Improving Your Overall Standing
Remain at the same address for at least one year.Even lenders specializing in bad credit lending want to see that their clients are reliable. One way to demonstrate this is to reside at the same residence for one year or longer. If your credit report shows an endless string of addresses, this does not bode well for your reliability.
Maintain steady employment.Having steady employment and an income that can be verified is a crucial component to receiving a car loan. For some dealerships and sub-prime lenders, having a steady, verifiable source of income is the only factor that decides whether or not you will get a loan. If you are not employed, work to rectify this before seeking a car loan.
- Your verified employment can be shown through a paycheck stub, W-2, or 1099.
- Know the address and phone number of your employer, as well as the name of someone a lender can call to verify your employment.
Open a bank account.Yet another way to show that are an established and responsible adult is to maintain a bank account. You may be asked to provide information about your bank account to potential lenders, either to show your balance in savings, or to provide a location for loan money to be deposited. Not only does the absence of a bank account make you look bad, it may disqualify you for a loan.
- Visit a local bank and speak to a representative about checking and/or savings accounts.
- The minimum deposit to open an account will vary by bank and type of account. In some instances, it may be as low as .
Obtain a phone in your name.When you apply for a loan, your lender may need to contact you. This will only be possible if you have a phone. Not having a phone makes it difficult for them to communicate to you, but furthermore makes you look irresponsible. Visit a telephone provider in your area and discuss phones plans (including prepaid options) that fit your budget.
Optimizing Your Credit
Learn your credit score.Go online and request credit reports from each of the three credit bureaus (TransUnion, Equifax and Experian). Learning your credit score and seeing what positive and negative items are listed on your credit report will help you to see where you stand.
Evaluate your credit score.If you have a credit score of 680 or higher, you will most likely get the best interest rate loans available. Scores between 550 and 680 are considered sub-prime. If you have a sub-prime score, you may pay higher interest rates. If you have a credit score of 550 and below, it may be difficult to obtain a car loan. If your score is below 550, you may want to work on improving this score before trying to purchase a car.
Dispute inaccuracies.Double-check your credit report for accuracy. It is not unusual for these agencies to make mistakes. Sometimes improving your credit is as painless as disputing inaccuracies on your credit report.
Pay off small balances.If there are any small, unpaid balances on your credit report, pay these off. Paying off small amounts so that they are no longer listed as “unpaid” on your credit report can work to improve your credit rating, and display good faith to potential car lenders.
- Often, collection agencies will take a smaller settlement than what is owed, so try to negotiate.
Optimize your "debt utilization." About 30% of your credit score is determined by your "debt utilization," that is, how much of your available credit has been used. For example, if you have a credit card with a ,000 limit, and you have only used 00 of it, this will help your credit score. You can optimize your debt utilization by either paying down some of your balances, or increasing your credit limits.
- If you have recently gotten a raise or paid off some debts, you may by eligible for an increase in your credit limits. Contact your credit card company for details.
Obtain at least one major credit card.Being approved for a major credit card (like a Visa or Mastercard) can help your credit score improve. This may be difficult if you have bad credit, but you can work toward it by opening a less prestigious credit account and making all your payments on time. After a while, you can apply for that Visa or Mastercard again.
QuestionIf I don't have any money, what is the highest interest rate I can be charged?wikiHow ContributorCommunity AnswerThe interest rate will be determined by your credit score. It will also be effected by the type of lender you work with.Thanks!
QuestionHow do I buy a car when I am going through bankruptcy?wikiHow ContributorCommunity AnswerThere are dealerships where you can purchase a vehicle by paying weekly. They usually will sell you a car as long as you are working and have been employed for at least a year. Keep in mind that the interest rate will be considerably higher than at a regular dealership.Thanks!
QuestionHow can I get a car with low income?wikiHow ContributorCommunity AnswerPurchase a used automobile.Thanks!
QuestionHow do I remove a cosigned vehicle from my credit report?wikiHow ContributorCommunity AnswerThe loan would have to re-financed and put under your name only.Thanks!
QuestionHow can I buy a car with no money down, poor credit and on a fixed income SSA?wikiHow ContributorCommunity AnswerAny dealer who will sell you a car in your situation is probably a predatory lender who'll set up unrealistic payments you can't manage. Remember, you also need to pay insurance and possibly a registration fee, depending on where you live. Your best option is to save what you can and do your research until you can afford to buy a cheap dependable used car.Thanks!
QuestionA used car cost ,000 and the dealer wants ,000 down. Is that fair?wikiHow ContributorCommunity AnswerThe seller can ask whatever he wants. It's up to you to decide if you accept the terms or not.Thanks!
QuestionDo I have to pay a down payment if my loan is already approved?wikiHow ContributorCommunity AnswerIt depends on if the approved loan amount is enough to finance the purchase. If you do put a down payment, you will have less to pay in return.Thanks!
QuestionWhat should I do if I'm still making payments on my car but I want to get another one?Bobby BoydCommunity AnswerThis has to do with your income to debt ratio. The banks will look at your finances and repayment history to determine if you can afford an additional loan. It is best to talk with a credit union or bank professional about this option.Thanks!
QuestionHow do I get a down payment when I have no money?wikiHow ContributorCommunity AnswerDepending on your credit score you might not be required to put a down payment on the vehicle. Some banks will charge a higher percentage of interest in you can not come up with a down payment. Money is required to get a down payment.Thanks!
QuestionIf I do have money to put down, how much do I need to have for them to not check my credit?wikiHow ContributorCommunity AnswerIf you are financing a vehicle, even with a down payment, they will always check your credit. You would need to pay for the vehicle outright, I think that may be the only way to avoid a credit check.Thanks!
How do I buy a car with no money down and bad credit?
I already own my car. Can I get a secured loan?
Why does inquiring about your credit hurt your score?
Is it a good idea to buy a car using a balloon payment?
What responsibilities fall onto the cosigner if a car is not paid?
- Do not allow yourself to be talked into signing an auto loan with a payment plan you cannot afford.
- Do not keep applying for credit because this will lower your credit score.
- Avoid financing extended warranties with high-interest loans.
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