Five Tips for Buying a Car When You Have Imperfect Credit

Getting a car loan as a single parent is hard enough – but what happens if you don’t have great credit? Are you afraid you’ll get knocked back for a car loan? Not everyone can have excellent credit – and lenders are usually inclined to help than not. If you’re in need of a car and have imperfect credit, don’t fret. Here are five tips for buying a car when you have bad credit so you can get behind the wheel sooner rather than later.

Set a budget

When you are looking for a car as a single parent, you need to set a budget. This will give you a rough idea of what you are able to buy while knowing how much you will need to pay in repayments each month. Showing your lender or broker a solid plan and proof that you can pay back your car loan will look good in their eyes. Look at car loan calculators to do rough estimates so you have answers to every question a broker may have for you.

Get a deposit together (if possible)

If you can save up a down payment for your car, especially if it’s used, a lender or broker for car loans will probably be more willing to work with you. At least 10–20 percent of the car’s value should go towards the down payment. You should now have a short list of the things you want to buy.

A down payment reduces the risk for the lender because you won’t need to borrow as much money. Don’t worry if you don’t have a deposit – you can still get approval.

Gather your payslips and documents

Lenders will check your credit to see if you can pay back a loan, but that’s not the only thing they do to make sure you’re a good risk. This could be in the form of pay stubs, bank statements, and home or rental documents. You might have a better chance of getting a better rate if you can show that you are paying off other debts, like credit card balances or personal loans, or that you have already done so. At this point, you should also get a copy of your credit score or history – you can get it for free every three months.

Know what your rights are

You need to know your rights as a customer whether you are buying a new or used car. If you buy something new, you have the right to a “cooling off” period. If you buy from a private seller, you have less of a chance of getting your money back. Before you buy, make sure you know what your rights are. If you are buying a used car, you should check the Personal Property Security Register to make sure you are not buying a car that has been written off or is still owed money on.

Get car loan preapproval

Getting car loan preapproval can help you in many ways. First of all, it gets your application out of the way – you’re already sorted when you go out to look! When you get preapproved, you’ll know how much you can spend and have more power when negotiating a price with a dealer or seller. It tells you in plain English how much you can spend on your bike without going over. It also keeps you from making a rushed decision. If your seller can’t match your preapproval limit, you have to walk away. Salespeople hate missing out on sales – especially at the end of the month when they need to make quotas. Use that to your advantage!

Remember to consult a financial adviser before considering any type of finance.