If you are looking for a quick way to get around Indianapolis and other areas, having a reliable car is necessary. However, life has a way of throwing unexpected events at us that could have a negative impact on our credit score. At Oak Motors, we believe everyone deserves a second chance, and a bad credit score should not stand in your way of owning your dream car. If you have bad credit, don't worry; you can do certain things to help improve your chances of getting approved for a vehicle loan.
Tips for Purchasing or Leasing a Vehicle with Bad Credit
It is not impossible to lease or finance a vehicle with bad credit. However, if your credit score shows that you have had difficulty paying your bills on time in the past, you may be considered a "high-risk consumer."
When a lender sees a high-risk consumer, they may adjust the loan terms to help offset some of the risks. This could include charging higher interest rates.
To help reduce some of the risks on the lender's side, you could consider:
- Having a co-signer. This is someone that will share the responsibility of making payments on your vehicle. If there is ever a reason that you cannot make your payment, the lender will ask your co-signer for the payment.
- Make a sizeable down payment. If you have bad credit, a lender is more likely to approve you for a loan if you are willing to pay for a portion of the vehicle upfront.
- Have a low debt-to-income ratio. No matter what type of credit you have, lenders will want to know about your debt-to-income ratio. Your income needs to be higher than your debt. If you have vehicles, houses, boats, and other items that you are paying for on a monthly basis, you need to make sure that that debt does not exceed your income.
What to Watch Out For When Shopping for a Car Loan
When you have bad credit, you may feel like you have limited options. There are some lenders out there that take advantage of your vulnerability. While it is normal for a lender to charge higher interest rates for someone with bad credit, some lenders will charge outrageous interest rates on your loan and make you believe that you have no other choice but to pay their rates. If you feel the interest is too high, you should always consult with another lender or dealership to see how their rates compare.
Find a Lender that Works with Bad Credit Applicants
Not all lenders are willing to offer a vehicle loan to people with bad credit. Some lenders will not even consider giving you a loan unless your credit score exceeds 720. Before applying for a loan with any lender, you should ask them if they offer bad credit loans.
How to Apply for a Loan with Bad Credit
If you are applying for a loan with bad credit, you will need to show the lender:
- Proof of income
- Proof of work history
- Proof of residency
- A valid driver's license
For proof of work history, you may need to show more than just a recent pay stub. In some cases, the lender may want to talk to your employer to ensure your job is secure.
Buy Here Pay Here Dealers vs. Traditional Lenders
Unlike banks or other lending institutions, buy here, pay here dealerships usually have more flexible loan requirements. This means they are more likely to approve you for a loan if you have a lower credit score.
At other dealerships, they may have to talk to multiple lenders to find you the right loan, which can take several hours. You don't have to speak to multiple lenders at a buy here, pay here dealership. You are getting the best rate directly from the dealership. This means that the entire process is significantly faster.
Oak Motors Can Help You Find the Perfect Vehicle
If you are looking to purchase a car, please stop by, contact us, or apply online now. We understand that unpredictable things happen in life sometimes, but we don't feel you should be punished for it. That is why we have spent over 35 years helping people of all credit scores get into the driver's seat of their dream car. Even with your below 800 credit score, our dedicated and experienced team can help find you a vehicle that will suit your needs and fit your budget.Categories: Buying Information