Car loans for those with bad credit are called “subprime” loans
You can still buy your next car even if you have bad credit
With the tough financial times that the country has experienced since the latter part of 2008, more and more Americans who once had good and excellent credit are now finding that this is no longer the case. One recent study has shown that 28% of all US households have experienced a decline in their overall credit rating in the last years. This means that many with good credit are now trying to get financing and particularly auto financing with fair and credit. Out of all this bad news, there is some good news and that’s cars are one durable consumer purchase that has a well established marketplace for making loans to those who are credit challenged.
As a starting point, it helps to know your credit score, often referred to as FICO score, going into the car buying process. If you confirm that your credit is fair or poor, there are several things you should do differently versus if you had a good or excellent score. Let’s take a quick look at what these may include.
- If there’s any way possible, try and pull together what you can for a cash down payment. This will serve several purposes including making the dealer you are serious and getting them to go the extra mile with you to make the deal work.
- Next, don’t get too focused on a particular brand or model car. Those that are currently very popular often don’t provide a dealer any reason to help you get financed.
- Take your time and shop around. Don’t believe everything the first dealer tells you as being 100% absolutely so. Check with several and you’ll find you can begin to develop your own informed opinion as to what may work best for you.
- Look into loans that are called “subprime”……… these are especially formulated for those without good credit. The interest rate may be somewhat higher but it may also make the difference between whether you are successful in financing your next car.
We all know the long term solution to getting a great interest rate on our next car financing is to get a better credit score and today is the time to start taking those small steps which can initiate the process of rebuilding your score and getting you back into the “good” zone. If there’s one piece of advice in this area that need’s to be said loud and clear, it’s STOP using your credit cards to the maximum extent you possibly can. Reducing your credit car debt will do wonders for your credit rating!