To finance the purchase of a new vehicle with bad credit, prepare in advance by acquiring your credit score approximately three months before pursuing a loan, as Edmunds.com advises. Pay attention to the risk section on the report, and attempt to resolve any issues to help increase your credit score.
When visiting with a lender, bring all the necessary documents, including a recent pay stub, current driver's license, current utility bill and any evidence of recently paid off debts, as CBS Money Watch explains. Aim to purchase an economic vehicle, such as a compact car valued below $20,000 because it may increase the chances of loan approval.
When applying for loans, first try getting a loan from your credit union or bank, as Bankrate suggests. Avoid lenders that specifically advertise to individuals with bad credit.
Lenders typically offer loans with higher interest rates to individuals with bad credit, but interest rates vary among lenders, according to Edmunds.com. Therefore, it is important to shop around at various lenders and dealers to find the best interest rate. Try getting pre-approved at various places before settling on a loan.
When choosing a loan, pick the loan with the lowest annualized percentage rate over the shortest period of time as opposed to loans with lower monthly payments and longer payoff periods, as Bankrate recommends. Ultimately, this saves money.