Many financial and economic situations can damage the credit score of a user. The damage sometimes goes to the point that it is difficult to purchase a vehicle. Even though a car is necessary for daily commute to work or school, getting back on solid financial footing becomes a challenge.
While it may seem daunting to qualify for a car loan if your credit score goes below 580, lenders and dealers are willing to work with you on a bad credit score. It grants you the vehicle of your choice and helps you get back on financial footing.
What is a Bad Credit Car Loan?
A bad credit car loan is similar to a regular auto loan but adjusted as per your credit score. It means that it comes with a higher interest rate, but lenders are willing to work on such a score.
A bad credit car loan gives you an opportunity to purchase the vehicle of your choice and improve your credit score. As long as you have payments done timely, you get an improvement in credit score that benefits you in many ways. Dealerships that typically deal with Bad Credit Car loans take the risk themselves with their In-House Financing.
What Are the Steps to Take Before Applying for a Car Loan?
It is easy to feel an urgent need to purchase a car when it is the key to commutation and improving credit score. However, it is also essential to take your time and research your options for loans, vehicles and assess your financial situation.
Here are steps that you have to take before applying for a car loan on bad credit.
Assess Your Credit Score
Auto lenders that work with you on bad credit car loans often charge a higher interest rate. It is because they want to ensure that the investment they make is safe and covers the risk of lending you money. Your credit score is the summary of your creditworthiness that lets the lenders determine whether to improve your loan or set the terms.
Before you apply for a bad credit car loan, assess your credit score and adjust your credit history. If you want to improve your credit score, you have to catch up on late payments and lower the cost of your loan.
Most lenders consider the score 580 to 800 as good. However, the ones that have a lower score than 580 should apply for a bad credit loan as a chance to improve their score.
Assess Your Income
If you have a low credit score, the lenders will look to your income statement to determine whether you can pay your monthly installments or not. Your income situation helps lenders issue you the loan and set the terms accordingly. The higher the risk, the more you will pay for a loan. Before applying for a car loan, assess your income and identify the amount you can pay for easily.
Give a Proof of Personal Stability
Besides your income information, lenders will also look for proof of your personal stability. It includes your relationship with your current employer and the time you have lived at your current address. It gives a signal that you have stability in your income and other factors that a lender can consider.
Down Payment is the Key
The amount of down payment you give lowers upfront costs and helps lenders approve your financing. The ability to pay a higher down payment signals a lender that you are serious about a purchase.
Know Your Limits
Always have a budget to find that you can set for the down payment and monthly installments as you also have other expenses to cover. Do not get caught up in the intimation by a salesperson as you already have a limited budget. The last thing you want to experience is to finance a car that you cannot afford and further damage your credit score.
Where to Find the Best Bad Credit Car Loans?
If you seek a reliable source for bad credit car loans, then you can consider the services of 500 Below Cars. They understand the issues that people with bad credit scores have challenges, and they offer various guarantees for their convenience. A glimpse of their services is as follows:
- 12 Months Unlimited Miles Warranty
- Certified Vehicle Inspection
- Trade-In Guarantee
- Vehicle History Report Through CarFax
After you have selected a vehicle and finalized its terms, the next step is to determine the payment. This is where the in-house financing option of 500 Below Cars comes in handy to give you the best buying experience. 500 Below Cars financing program does not require credit score maintenance as our approval is based on residence and job history. Our only requirement is a few documents that you have to bring that includes:
- State ID, Passport or Driver’s License
- Proof of automobile insurance
- A recent utility bill as a proof of residence
- Bank statements and income slips as proof of income
- TIN or social security number
- 5 references
Advantages of 500 Below Cars
500 Below Cars offers some advantages when you consider their in-house finances. They include:
- 500 Below Cars understands misunderstood credit.
- Low down payment
- Flexibility on loan terms
- Speedy and responsive process
500 Below Cars are your go-to service for considering financing a car when you have a bad credit score. They offer services such as a second chance car loan that gives you an opportunity to buy a car on a negative credit and improve it with regular payments. They have in-house financing options present that benefits you from setting the terms of the loan and having your dream car. With their financing option, you get swift service and flexibility on