How to afford a car with bad credit

It’s possible to afford a car even if your credit report isn’t up to snuff. Learn how to afford a car with bad credit today.

Set Yourself Up For a Successful Purchase

It’s taken many people years to rebuild a life after the economic whiplash of the Great Recession. For a few years, banks weren’t giving out any loans, and getting a car meant you needed perfect credit. Fortunately, banks and lenders have eased the financial belt-tightening somewhat, and it’s possible to afford a car even if your credit report looks like a minefield.

You’ll always get a better interest rate if you apply for car loans, mortgages, or personal loans with a good credit score, but time isn’t always a luxury. You might need a car and if you need it now, you don’t need to fear that your lender will automatically reject your application based upon a low credit score.

Get to Know Your Credit Score

  • Before you start car shopping, get acquainted with your credit score. You can get a free credit report each year, courtesy of an agreement the major credit bureaus made with the federal government. Sometimes you can get your score for free if you have certain credit cards, and the website “Credit Karma” also offers you free access to your score with one of the major credit bureaus.

Do Some Credit Housekeeping

  • Depending on the number of accounts you have or your current credit situation, you might benefit from getting a few debts out of the way. Perhaps you’ve got a credit card that’s over the limit. Try to get it below the limit before you apply for a loan. Maybe you have an overdue payment for one of your utilities and they’re reporting it to the credit bureau. Try to take care of that bill so the negative data is removed from your credit report.

Save Up a Down-Payment

  • You don’t need a down payment to purchase a vehicle, but offering some money for the purchase certainly helps the application process. Anyone with a particularly low score may find an approval with a down payment in hand. If you’re getting a new car, you want to save up around 15% to 20% of the purchase price. If you’re going for a used car, try to gather 5% to 10% of the purchase price.

Get a Used Car

  • Used cars once had a reputation for being beaters and lemons, but that’s not the case today. Often, buying a used car is a better idea than buying new, particularly if your credit score is in the dumpster. Consider that cars today last many years longer than their predecessors and also retain their value. That three-year-old Hyundai will provide you with just as many happy miles on the road as a new Hyundai.

Never assume that your credit score is too low to get approval for a car loan. Lenders and car dealerships are certainly willing to work with you, and most people today can qualify for a car loan.