If you are buying a new or used car but you have bad credit, you can get stumped when trying to get auto financing. Many companies will simply decline you if you have too many open credit accounts, a high debt-to-income ratio, or if you have derogatory accounts that you haven't been paying up on. You can still get financing a few ways so you can get into the car you desire. Here's how.
Choose in-house financing
In-house financing is where a car dealership has their own financing program for buying a new or used car. You have a great chance of getting this type of financing if you have a large down payment to place on your vehicle or if you have a trade-in vehicle that can be put towards the purchase of the car you are interested in. If you don't have a lot of money to put down on a new car, consider shopping for lower-priced vehicles so you can put forth a higher percentage towards the total cost and up your chances of financing companies who have this option.
Consider your bank
If you are in good standing with your current bank and do not have an account in overdraft, you may be able to get auto financing through them rather than a traditional lender. Your bank knows your deposit history and can help you get into your new car based on how responsible you are with your current account and how long you have been banking with them. They can even work with your bad credit by using their partner lenders to help you get into your new car financing agreement without an issue. You will want to set up an appointment with your bank prior to choosing a car to see how much financing you qualify for so you can shop more successfully.
Many financing companies are willing to finance a car buyer with poor or non-existent credit. To protect themselves, they often have higher interest rates and shorter financing terms, but this is an excellent option for you to try if you are buying a more expensive car. You can help offset the cost of the interest rates by paying as much down as possible upfront for your car, making your payments on time every month, and paying your car off early if there is no penalty involved in doing so. Talk to your banker about financing to learn more.