Misconceptions About Getting a Car Loan with Bad Credit
Millions of Americans
depend on their cars every single day. Monday to Friday, you drive back and
forth to work. You take the kids to school and after-school activities, and take
them later. You go to the store to stock up on much-needed food, drink, and
household goods. On the weekends, you go shopping or maybe to the beach. You
give friends and relatives a ride. You enjoy leisurely drives with the wind in
your hair and the open road ahead of you.
We all have our own
responsibilities and pleasures, but access to a car dictates whether you’re
able to accommodate them or not. In the modern world, even with public
transport and car-pooling, your own vehicle is a gateway to freedom, flexibility,
drivers take having a car for granted, and may not realize this until they find
themselves without one.
Buying a new car is
often easier said than done, of course, especially if your credit score has
dropped over time. With a poor credit score, trying to secure financing for your new vehicle
can be incredibly difficult, which leads more of us to used cars instead. Considering
how much of a credit-based world we live in today, there are many myths and
misconceptions out there about getting an auto loan with bad credit. People having
no idea whether it would be possible to secure an auto loan can be daunting
enough to prevent even thinking about it, and that may result in missing out on
that new car they need so much.
Here are seven common
misconceptions about getting a car loan with bad credit. If your score is poor,
look at the myths explored below for the peace of mind and inspiration to start
Large Down Payments
are a Must
The prospect of having
to make a very large down payment on your new car is daunting, especially if
you’re struggling to gather the money required. You may believe you’re expected
to set thousands of dollars aside just to be considered for an auto loan, and
feel your inability to do so puts you out of the running. It can be an
unnecessary source of stress and frustration, on top of the challenges you
The reality is that
you can still apply for an auto loan without having to make a huge down
payment. A bad credit score may prompt some lenders to insist upon larger down
payments, but this is dependent upon their own policies, the terms of the loan,
and how much of a risk they consider you to be. Of course, the more money you
do put down, the smaller your monthly payments will be, but you may not be
pressured into a bigger down payment. Certain dealerships, especially those
specializing in used cars, will be more willing than others to accept your
application without a large down payment.
Banks are likely to
place a major emphasis on bigger down payments, especially if you have bad
credit. Shop around at different dealerships and discuss what type of upfront
costs you would be expected to cover if your application were successful, and
you may be pleasantly surprised. Not every business follows the same rules
regarding financing or payments.
Buyers with Bad
Credit Cannot Expect Instant Approval
believed that only people with good or excellent credit scores can walk into a
car dealership and receive instant approval. This seems like a true luxury
reserved for those with years of experience making every payment on time that
comes their way, but you may still be given instant approval for an auto loan
even if you have a low credit score.
It’s important to
remember that having a bad credit score doesn’t mean you’re unemployed, unable
to make any payments, or generally untrustworthy. There are all kinds of
reasons behind a low credit rating. For example, you may have slid further and
further into financial difficulties after having your hours reduced at your
job, after having to take a lower paying job after being laid off, or because
of having unexpected medical or household expenses.
Being unable to make timely
payments is a common reason for poor credit, and anyone can get into debt, even
people with high incomes. If you can show that you are currently employed and
generating a steady salary, it’s more likely that a dealership will grant you
specializing in pre-owned vehicles are dedicated to working with customers
facing bad credit scores. These companies guarantee instant approval to
everyone who applies for a car loan, and base their acceptance on how likely
buyers can now cover their future payments, rather than how they managed in the
are Your Best Option
Your loan period is a
vital factor to consider. After all, when you apply for financing to buy your
new car, the prospect of being stuck with payments for years and years can be a
challenge. It’s instinctive to want the shortest loan-term possible, to avoid
paying more interest and getting the debt paid off as soon as you can. However,
there are a couple of things to bear in mind here. First and foremost, your
budget; agreeing to pay more than you can afford every month isn’t going to do
you any favors. In fact, missing payments is more likely to cause you to fall
into even more debt, potentially dragging your credit score down even further.
Secondly, you need to think about how this plays into rebuilding your credit
for a better rating overall. The more payments you can make on time, the better
your score will continue to improve over the coming years. By spreading
manageable costs across multiple plans, such as your mortgage, car loan, and
credit cards, you’ll prove yourself trustworthy and reliable. A long-term auto
loan might not seem too desirable right now, but people with bad credit ratings
should consider this to keep your monthly expenses as balanced as possible.
Don’t forget the other financial commitments you may have, or those that might pop
up in the near future, when applying for an auto loan.
Bad Credit and New
Jobs are a Lethal Combination
misconception about getting a car loan with bad credit is that new jobs will
hamper your chances. It makes sense, of course. Starting a new job can mean
your finances are a little unsteady for a month or two, as you adjust to a
different income level, and there may be a chance that your new employment
doesn’t work out. However, there’s no reason that having a new job and bad
credit rules you out of getting a car loan.
If lenders can see
that you a steady work history in the past, they will be more likely to
consider your application. Having years of experience in one or more positions,
with minimal or no periods of unemployment, demonstrates that you’re capable of
supporting yourself and meeting your financial obligations. Simply starting a
new job, and having little to show for your time at a new company, is not going
to undermine your work history.
Some lenders will want
to see at least three months’ worth of pay slips for your new job. This might
not be so important if you have an extensive history of employment to point to,
while others may even take an employment contract as reassurance that you will
be able to manage repayments. If this is your first job, then you might find
proving yourself a low-risk applicant a challenge, but certain lenders may
still offer you instant approval.
Your Auto Loan Will
Not Help You Build a Better Credit Score
Building your credit
score and establishing a more stable rating for the future is essential, but
some believe an auto loan won’t help you do so. It turns out that auto loans
are one of the best options for starting to repair your credit, even if you do have
a low rating. When credit agencies are assessing your credit score, debt type
is one of the areas they focus on.
Car loans are
generally referred to as an ‘installment loan’, which means they have rates of
interest and a fixed term. This is different to credit cards, where payments
are considered ‘revolving debts’, with variable rates and terms. Unlike credit
cards, installment loans are come to an end after a specified number of months
or years, which makes it easier for you to plan ahead. Getting a car loan with fixed
monthly payments you can afford on your budget, taking possible lifestyle and
work changes into account, is a smart, simple way to repair your credit rating.
Manage your money so you can always make your payments when they are due, and
minimize the risk of over-spending by eliminating non-essential purchases. Having
a credit card or two, in addition to your car loan, can also help to show you can
be trusted to pay your debts, as long as you make those payments on time.
No Credit History
is Better than Bad Credit History
First-time car buyers,
especially those of a young age, may have very little or no credit history.
With no credit cards, no mortgage, no previous loans, younger people
essentially have a blank slate when starting out. It’s a common misconception
that someone walking into a dealership with no credit history is better than
having a bad credit history to your name. It’s fair to assume that lenders
would look at this, understand the situation, and be receptive to offering that
person a car loan. But that is simply not the case. After all, if you have
little or no history of making timely payments on a regular basis, how can
lenders be sure you will manage your finances and stay up to date with your
monthly car payments? They can’t be.
Even if you have a bad
credit score, lenders can look at the story behind your personal circumstances of
financial difficulties and evaluate your current situation. If you have been dealing
with a string of unfortunate circumstances, such as unexpected medical bills,
or were forced to take a lower paying job, they may take this into account and
still offer you a loan.
You can Only Have
an Auto Loan on One Vehicle
Let’s say you have bad
credit because you lacked the money to make payments on time, but your
situation has changed. Perhaps you now have a better-paying job or fewer monthly
expenses. You may have a need for two new vehicles instead of just one, or perhaps
you already have a car loan but now need a pickup truck for work. You might
think that people with bad credit are limited to just a single car loan, but
that’s not the case. Even if you have poor credit, you might still be able to get
approved, for more than one, or for a second auto loan. Of course, this might
seem like taking on too much and setting yourself up for more debt than you can
handle, but if the funds are available and you can demonstrate that you have a
stable income, there’s no reason why you shouldn’t be able to juggle multiple
payments on a regular basis. Having two auto loans you pay off each month could
help you repair your credit score faster, too, as you would be showing an
ability to manage multiple debts in a responsible way.
Having bad credit can
be frustrating and even upsetting. You may feel like it’s holding you back, or
as if you have let yourself down by failing to make timely payments in the
past. However, credit scores can be rebuilt and improved over time, if you
choose a sensible auto loan you can afford to pay it off on a regular basis.
As the above
misconceptions suggest, you may not realize how good your chances of securing a
loan may be, especially at Eden Autos. Eden Autos is a dealership that has a long history of getting customers with bad credit ratings, even those with no credit history, instantly
approved for loans that are within their budgets.
Our friendly, experienced,
staff of financial professionals are always
available to help you find the perfect pre-owned car or truck at a fair price,
with a guarantee of instant credit approval. With our extensive inventory of quality pre-owned vehicles, we’re sure to
have a vehicle to match any auto needs and budget. Call us at 215-977-4772, or
stop in to see us, we’re conveniently
located at 6213 E. Roosevelt Blvd in Philadelphia.