Buying a used car tends to be more pocket-friendly than purchasing a new one at times. New cars tend to lose their value within the first three years. This means that you can’t resell the car to get most of your money back. On the flip side, most used cars will have already depreciated by the time you are buying them, meaning that someone else will have taken that financial hit.
Even better, you could easily get cheaper insurance premiums for a used car than a new one. This will, however, be dependent on your insurer and the model of your car. With the right used car financing, driving off the dealership with your dream car will be possible. The trick lies in how you apply for financing.
With the above in mind, let’s review how to finance your used car purchase.
Start with Knowing Your Credit Score
A credit score is a simple summary of your creditworthiness. Lenders use credit scores to determine how risky it will be to offer loans to specific borrowers. Ideally, credit scores range from 300 to 850 points. Having a higher score means that you can easily get used car financing at an affordable interest rate. Lower scores typically attract high interest rates, with some lenders choosing to keep away from borrowers with low scores.
Luckily, you may still get an auto loan for a used car even if you have bad credit. You are entitled to get three free credit reports from the three credit bureaus, one from each. Be sure to request a report from them before you apply for loans. If you have a low score, it is wise to start working on improving it early. You can always check for errors in your credit report that could be leading to a low score. Feel free to challenge these errors with the respective credit bureaus.
Start Comparing Options from Different Lenders
Most buyers only think about financing options when they are already in the dealership’s financing office. While the dealership will offer you used car financing offers from lenders it partners with, there is no telling if they are interested in getting you affordable loans. You might only get a great offer if they think you are talking with other lenders who are offering more affordable alternatives.
Be sure to shop around for financing from different lenders. You should compare the perks of their offerings and how they translate to your situation. For instance, if you have bad credit, you should focus on lenders who can offer you loan terms that match your credit situation. Compare other aspects of their offers, such as the interest rates and the typical repayment period.
Get Prequalified and Apply for the Loan Later
Loan prequalification lets you know how much used car financing you can get from a lender without actually going through the entire application process. This can help you budget for your car. The best thing about it is that it doesn’t affect your credit score and instead leaves a soft inquiry on your credit report. In comparison, the actual application process leaves a hard inquiry, which could lower your score if done excessively.
Going through too many loan application processes portrays you as a risky borrower to most lenders. Pick your top lenders from step two and get prequalified by them. You can then proceed to shop for and finance your dream car.
Your Credit Score & Superior Financial Services
Having a great credit score will almost always ensure you can get great used car financing deals. That’s why you need to keep tabs on your credit score. Improving your score comes down to timely bill payment, a low credit utilization ratio, proper debt management, and low credit card balances.
At Superior Financial Services, we are here for you and may be able to help you get a used car loan with bad credit. Get in touch with us today to get started.