You are much more than your credit score. However, when you’re looking for car loans for bad credit, it can be a difficult and frustrating process. Ride Approval of Canada can help those with bad credit secure financing, and we’ll tackle some of your urgent questions, including how much money you may have to put down on a car if you have bad credit.
How Much Is a Typical Down Payment?
This varies extensively depending on several factors, the main one being your credit score. Typically, it’s advisable to put 20% down with, 10% down as the absolute minimum.
How Much Money Down for Car Loans for Bad Credit?
In general, if you have bad credit or no credit, a higher down payment is usually required on car loans for bad credit. Sometimes, this may be as much as 20% of the sale price. However, every situation is different, and other factors, such as employment, carry some weight in factoring whether or not you’ll get a loan.
Remember that the larger your downpayment, the smaller your monthly payments can be. This can result in saving as much as $10 or $20 per $1,000 that is put down on the car.
Can You Put No Money Down If You Have Bad Credit?
Believe it or not, you can! You simply need to work with a company that specializes in car loans for bad credit. Often, you’ll be surprised at how this can not only get you the vehicle you want, but how it can work toward gradually improving your credit score.
How to Buy a Car With Bad Credit
If you have poor credit, don’t think that a set of wheels is beyond your reach. There are several steps you can take to help you secure the car you want, and these can go a long way toward helping your credit score get back on its feet.
Check Your Credit Score
You should know what your credit score is before you walk into the car dealership. Typically, they range from 300 to 900, with 900 being the best, highest credit rating. It’s also important to check your credit rating to be sure it’s accurate and that you haven’t been the victim of identity theft. There are several free online sources that will help you evaluate your credit score. Remember, if you find any disputable items, be sure to give yourself 30 days to get them resolved before you start shopping for a car.
Take Time to Improve Your Credit Score
Sometimes you need to have a car immediately due to unforeseen circumstances, but as much as possible, try to plan your car shopping early. Why? This will give you a chance to improve your credit score before you buy it.
One of the best ways to improve your credit score is to pay down any credit card accounts. However, it’s very important that you don’t cancel these credit cards, as that could negatively affect your score. Try to keep your credit utilization at around 30%.
Stay Within Your Budget
Be sure you don’t get a loan that is more than you can afford to pay back. Know your budget and use a loan calculator that will help you see how much you can afford. It will also help show how much interest you’ll be paying on your loan.
Consider Getting a Shorter Loan
If you have a longer loan, this is considered a greater risk than a shorter loan, and as a result, the interest rates are often higher. While the monthly payments will be more for short-term loans, if you can make this work within your budget, it could be a feasible option.
See If the Lender Will Allow a Co-signer
Granted, not all lenders offer this, so check to see what terms are allowed. However, if your credit score is less than ideal, having a co-signer can help. This may be a good option for car loans for bad credit.
How to Rebuild Your Credit
Having bad credit can make your life much more difficult. Even when you get a car loan for bad credit, it doesn’t help you with the underlying problem: your credit score. Don’t worry; there are ways you can rebuild your credit.
Rebuild Your Credit Through Automotive Loans
Often, you can rebuild your credit through high-interest auto loans. These will not only allow you to obtain the car you want or need, but it can put you on the right road toward improving your credit.
Get a Secured Credit Card
Your bank may offer a secured credit card. Through this, your credit is directly based upon the deposit you have submitted. For example, if you make a deposit for the card of $500, then the spending limit on that card is $500. Sometimes, cards may have a program that will allow you to go to a more traditional line of credit provided you’ve made regular, on-time payments. However, this option isn’t offered by all lenders, and it’s important to read the fine print before beginning any credit restoration program.
Resolve Negative Marks on Your Credit Report
Do you have any loans in default? Are you behind in payments? Simply contacting the creditor to discuss any options could be a way to find yourself on the right track. Sometimes, all that is takes to improve your score is to bring your accounts to where they are current again. Even if this doesn’t help your credit score improve, it will prevent it from going any lower.
Pay Down Any Current Debt
We’ve already mentioned how high credit card usage can quickly deter any plans for a car loan. You should pay off credit cards in full each month in order to keep your credit utilization low. The higher your credit utilization, the greater the impact it has on your credit report. Therefore, many experts suggest keeping your credit utilization below 30%
Don’t Close Credit Card Accounts
Don’t close any of your credit card accounts: even the ones that you rarely use. Why? Because the history of your accounts does play a role in your credit score. Therefore, it’s important to keep those older accounts active.
Use Caution When Applying for New Credit
When you’re shopping for a car, be wary of taking out any new lines of credit, particularly if you’re doing so within a short period of time. When you apply for new credit, lenders will check your credit score with something called a “hard” inquiry. These will cause your score to dip, and if you have too many of them at one time, it can cause damage to your credit score and be counterproductive to what you’re trying to accomplish.
The Best Car Loans in Alberta
Ride Approval works with a wide variety of lenders to ensure that you get the best loan possible. Applying is simple, free, and we work with all types of credit scores. All it takes to be pre-approved is to earn more than $1800 a month and have been employed for three months. Contact Ride Approval today.