People with poor credit often assume that an auto loan is beyond their reach. These same people may also assume it'd be easier to purchase a vehicle with cash or from a private seller. But, these ideas could be leading consumers with bad credit down the wrong path.
Why Cash Isn’t the Right Option
It may seem logical, but it won’t help your situation if you buy a car with cash and roll on down the road. There are some important advantages to auto financing, especially if you have bad credit. Cash can get you a car, but it won't give you a chance to build your credit. An auto loan is a great way to build credit if you make the payments on time. With auto financing, you give yourself the chance to finance your dream vehicle in the future.
Private Sellers Offer No Guarantee
The same can be said for buying from a private seller. This may initially seem like a lower cost option, however, any potential savings may be outweighed down the road. For example, private sellers can’t provide any warranty – all purchases are made as is – which could leave you in a financial bind if you find something is wrong with it later on.
In addition, the paperwork is the responsibility of you and the seller. When you purchase from a dealer, they'll take care of these details for you, saving you time and trips to the DMV. Another thing a private party sale can’t assist with is the sale of your existing vehicle. You'll be faced with selling it yourself, whereas dealers are able to purchase your trade-in and apply its equity toward your purchase.
Some Things to Do
Banks and credit unions usually only lend to people with good credit. Although we recommend that you check with your bank or credit union first, typically anyone with a FICO credit score of around 620 or below will need to look for a subprime lender. These lenders are only found through special finance dealers they’re signed up with. Fortunately, there is a light at the end of the tunnel if you have bad credit. Your credit is continually changing and it’s never too late to begin improving it.
Here are some things you can do to ease the sting of credit misfortunes:
- Pay all your bills on time – Building a solid payment history goes far when you’re working on improving your credit. In fact, it’s the biggest factor in your credit rating. Paying all bills on time and in full will reflect positively on your credit score.
- Limit what you owe – The amount of debt you have is the second largest thing lenders look at. Keeping your credit card balances low will help improve your credit rating.
- Mix it up – Successful credit means managing different types of credit. Balancing a mix of revolving credit like credit cards and installment credit such as auto loans and mortgages looks promising in the eyes of a potential lender.
- Don’t apply for new credit all at once – Opening several new lines of credit at the same time could be a red flag. The key is to only open credit that is truly necessary. If you're looking to build your credit, a secured credit card is a good start.
Special Finance Dealers
One thing to realize is that you’re not alone. Millions of Americans are in the same boat and there are programs available that are designed to help people out of tough credit situations. That’s why, here at Auto Credit Express, we strive to use our experience for good. Through our dealers and their lenders, we help people see that life, and credit, can improve – in fact, the two go hand in hand.
Our nationwide network of special finance dealers have the lending resources available to help credit-challenged people get the financing they need. We want to help guide you toward one of these dealers in your area, just fill out our free, no-obligation online auto loan request form to get started!