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Buy a Car with Bad Credit

Before we proceed with the advices on how to buy a car when you have bad credit we will give you this advice:

Don't buy a new car with bad credit. Wait till you improve your credit and only then buy your car.

There are many cons of buying a car with bad credit. First, it is your credit score that will be used to determine your auto loan approval and your loan APR. Car buyers who have bad credit usually get interest rates above 20% whereas the average is 6-7%. Second, bad credit car buyers usually don't have enough cash to put 20% down. With new cars depreciating about 20% during the first year not paying 20% down payment leaves them upside down on their car loan. Third, your credit score will be also used to determine how much you will pay for car insurance.

Having a bad credit score means that you have experienced financial difficulties and probably already have debts that are waiting to be repaid. You hardly want to worsen your situation by paying much more for your car purchase that what you would pay if you just wait a little till you repair your credit.

You have been warned. However, there are some specific situations when you don't have the time to wait till your credit is improved. This article addresses the cases when you are determined to buy a car despite your bad credit.

Buying a Car with Bad Credit

If you have bad credit our advice would be to look for the best car loan possible first and then choose your car second. Your budget will be grateful.

In any case, having a bad credit score will make it hard for you to choose brands or models. This is because while you are trying to find auto financing for a particular car model, its dealer may not be able to find a lender who is willing to give a car loan to such a risky (bad credit) borrower. At the same time you may be able to find car financing for another model more easily. Thus, with bad credit you are not always able to choose car brands and might have to solve the financing first and choose the particular car second.

It will be even harder to find auto financing if you have bad credit and insufficient income. Don't even bother applying for a car loan if you have monthly income below $1600, it is almost guaranteed that you will be rejected.

If you are heading for a bad credit car loan anyway and you are going to pay that 20% APR, then do not finance extended warranties and extras into your high APR loan. You don't want to pay such a high interest on any additional items, don't you? You can buy them separately without the dealer markups.

Finally, at least wait to save those 20% in down payment before you buy your new car. Why be upside down on your car loan after the first year if you can avoid it.

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