It is everybody desire to have a car and drive it on the city road. So what can you do if you don’t have the sufficient money for buying it? One way is to buy the car on loan. But for that you should have good credit history. Nobody wants to have a bad credit history or rating. But in case we have a bad credit history, then how can you take a loan from the lender. Lenders find it difficult for a car loan with no credit rating.
The lender will go through a detailed study of the proposal for a loan and check the person if he will be able to pay the loan amount. What is the solution for those people who want to finance a car having a bad credit rating?
Steps to finance a car with bad credit
1. Prepare required documents earlier:
Give the information correctly in the application and prepare your income report early because the lender will check credit rating through your social security number. You should have all the required documents at the time of applying.
2. Meeting with differnt loan providers:
Initially, you should meet with a couple of loan providers who can understand your loan requirement and give you a better choice for your car loan. Find a partner, who can help you in the meetings with positive and negative arguments in the favor of you to get a better offer.
3. Apply for multiple loan applications:
You shouldn’t apply to one lender only in the way of financing a car. Take the information from the banks, local credit union that what they are offering to you. Fill the multiple applications at the same time. This will not degrade your credit rating and credit bureau will come to know that you are interested to apply for a car loan.
4. Know your credit rating:
When you want to purchase a car on loan, there is a certain amount of interest which you have to pay. So how does the lender decide that how much of an interest rate, he will take from the borrower and this depends on the credit rating or credit history?
The question arises as to where did the credit history come from. Actually, this is decided by the credit bureau on the basis that how much you have debt, and do you pay the bills regularly or not, what is your income to debt ratio which means that how much debt versus income ratio you have. The Lender generally sees the following things and on the basis of credit rating they will charge interest rates.
The person with a low credit history will have to pay higher interest rates compared to the one with high credit rating.
You must know your credit rating before applying for a loan and you can get this information by paying a certain amount of money to an institution such as FICO.
5. Make your credit rating high:
Make sure that your credit rating is high so that you have to pay less interest rate. This can be done by paying the previous bills, credit card payment and any other dues to you. It will increase your credit rating at the end of the day.
6. Pre approval purchase:
If you have a bad credit rating, then you can have the option for applying for one or two small loans where you have to pay for a shorter period of time and sure, you will increase your rating by paying them on time.
7. Shorter loan term:
Another thing of concern is that how much is your loan term. If you have a longer loan term period the monthly installment will be less but the interest rates will be higher. So apply for a short term period where you can pay the loan amount without any hassle.
8. Where to finance:
There are many companies, which offer some good new car finance deals in the market. But most of the people think that the dealership owner has the best offer for you when applying for a car loan, but this is not the case. You should take a preapproved loan from the bank, credit union or third party and then compare the prices of the dealer and the bank. If the dealer is giving you a car loan at low-interest rates, then you should also consider the term of the loan. Because a higher term period will make the cost of the loan amount to be at a slightly higher level. So you should consider these things in mind while applying for a car loan.
If you are dreaming of buying a car and want to take a loan, but you have not good credit rating. The best option is to improve your credit rating by paying your bills and your credit card history or there are certain dealers who offer loans if you initially pay large amount of money as a down payment on high interest rates.
Car loan terms, you should know about:
What is a car loan?
A car loan is a term which is used to purchase a new car or used vehicle. Suppose you don’t have enough money and you want to purchase a car then you have to borrow the money from the lender for which you have to pay a certain amount of interest on the loan principle.
Loan principle is the total amount that you are going to borrow from the lender. For e.g., your loan amount is $10,000 and there is a 5% interest on the loan principle so at the end of the loan period the total amount which you have to pay is $10,500. You will have to pay taxes and fees. So while considering for a loan amount take all the expenses which you have to make which includes the insurance, fuel, and repair cost.
The term of the Car loan:
The meaning of the loan term is that the time by which you have to pay the total loan amount. For e.g. you have a loan term of five years, so you have to pay the total amount of the loan in 5 years which means the loan principle with the interest rate. This doesn’t mean that you come back after five years with the total loan amount.
What most of the company does they fix monthly installment for the whole term of the loan. In this way, you can pay the monthly installments and after five years when you have paid the total amount then the car is yours.
Many people think that when you take a car loan from the lender, the car is yours, but technically the lender allows you to use his car until you make the whole payment. In case you are not able to pay the money any time he can take his car back.
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