Buying a vehicle is an large purchase, creating a booming auto industry; but people with bad credit would probably tell you how tough it can be. Many business owners and entrepreneurs find themselves with lower credit scores while bootstrapping a company. Truth is, investing in a new vehicle can be a pretty satisfying event, as long as you go in prepared after conducting some research.
So the question becomes, what is the best place to get an auto loan with bad credit? The answer is definitely NOT the auto dealership – at least, not as your first option. You can almost always obtain one at the dealership; but your loan term may be unconscionably high. Researching beforehand can save you thousands of dollars.
Shopping Locations for Bad Credit Loans
These loans are also known as subprime – similar to the types of mortgage loans handed out in the years before the housing situation of 2008. Since scores below 600 are considered in the low credit bracket, any auto dealer will look to take advantage of that score by fast-talking you into accepting the first deal she offers.
How do you avoid this sales pressure? Go through the pre-approval process first, and obtain a qualified loan with a defined interest rate from an online source. This provides an auto dealership with incentive to try and beat that loan, which could put you in a better position – even with your subprime credit history.
There are also sites that cater to borrowers with bad credit, and checking these out first could give your serious financial leverage. Chances are, you’ll get a better offer here than any brick-and-mortar business location.
Beware of the Upsell and Extra Products
If you happen to end up at an auto dealership after exhausting your online options, then you need to be prepared for some very skilled sales-talk. All automotive businesses have a manager that has secured that position because of his ability to talk you into buying add-ons to your vehicle, opting for lower monthly payments for a longer payment term (and better car), and extra services sold as imperative to your enjoyment of the car.
If you’re wary of the upselling, then asking a friend to come along often helps tremendously. It makes it far easier to have someone who isn’t invested in the vehicle chime in and nudge you with a “you don’t need that” push. The last thing you want to do if you have bad credit, is to be saddled with a higher interest rate that could lead to you defaulting on monthly payments down the line.
Never Leave the Lot Without the Approved Loan
You open yourself to a type of loan scam called the ‘yo-yo financing method.’ If the sales manager is with you in his office, trying to qualify your loan, and tells you it’s okay to just take the car – don’t do it. Your loan may fall through; upon which you’ll get a call trying to convince you to take an unfavorable deal. There will be a lot of pressure; especially since you’ve driven off the lot and now enjoy your new ride. It’s meant to be a psychological ploy that takes advantage of your satisfaction, and the call can sometimes come a week later. Also called ‘spot delivery’, this method can be very frustrating and inconvenience you enough to take the high-interest loan they offer. Avoid this at all costs.
Obtaining a good auto loan with bad credit is no picnic – but a responsible approach that starts with an online lender can work out just fine in the long run. Don’t get suckered into any old deal that sees you struggling to make the monthly payments; you can always refinance down the road as you fix your credit score, and thus options, improve.
Image from https://www.consumerfinance.gov/consumer-tools/auto-loans/