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How to Buy a Used Car When You Have Poor Credit

It happens to the best of us: sometimes, life throws us a few curveballs, and we end up struggling financially. It’s especially true during times of uncertainty when we do our best but still end up needing a little extra support. If you need a car, but you lack the cash or good credit to make it happen, don’t worry. You have options. All you have to do is look for a used car dealer that specializes in working with buyers who have challenged credit.

Finding yourself in a cash crunch is a terrible feeling, especially when your car dies. Since so many of us struggle at some point in our lives, the subprime lending market continues to grow and evolve, providing much-needed relief during difficult financial times. These lenders are true specialists – they focus on getting everyone financed, despite their credit history, and they may hold the solution if you find yourself in this position.

Several car dealers focus primarily on helping buyers find reliable transportation within their specific monthly budget, working backward from price and finding a few vehicle options that fit. Some offer Buy Here Pay Here services, which means the dealer itself funds the loans, and others have access to decent loans with reasonable interest rates that put struggling Americans in cars they need. The most reputable dealers treat credit-challenged customers just as well as those with excellent credit because credit score shouldn’t matter.

If you’re looking for a way to finance a car and need a little extra help, our guide will set you down the path to a solution. It’s important to know the terms and variables before you start shopping, so you can locate a dealer that has your best interests at heart and won’t take advantage of your less-than-ideal financial situation. They do exist, more than you might realize, and their goal is to get you financed and mobile as quickly and affordably as possible.

What Is a Credit Score?

A young woman is signing paperwork at a used car dealer.

Put simply, your credit score is a numeric rating of your spending and credit history. It tells potential lenders your payment history for credit accounts, as well as your debt-to-credit ratio, which basically means how much available credit you have on your existing credit cards and loans. If you pay your bills late, it will negatively impact your credit score, and if you keep high credit card balances, this will also affect your number.

Credit scores can range from a low of 300 to a high of 850. The higher the credit score, the more likely you’ll be approved for a loan and the better interest rate you’ll qualify for, while a low credit score tells lenders you might be a credit risk. That means you’ll have trouble getting approved for car loans, mortgages, or new credit cards. These days, even the electric company will run your credit before extending you an account, so it pays to keep your payments on time whenever possible.

Unfortunately, our nation is saddled with crushing levels of consumer debt. In the third quarter of 2020, it was estimated that Americans were carrying over $14.35 trillion in debt. That’s trillion. Of that amount, $807 billion is estimated to be credit card debt. Since credit card interest rates can climb into the mid-20% range, it’s no wonder many of us are falling behind.

What’s a reasonable credit score, then? The credit monitoring company Equifax considers a 670 score at the bottom end of a good rating, while credit scores starting at 800 are qualified as excellent. Buyers with scores in the 800 range typically have access to the very best rates. So what happens if your credit score dips below 670? Well, scores from 580 – 669 are still considered fair. If your score is lower than that, you’ll need to seek a lender with experience financing buyers with poor credit.

How Can I Get Financed?

First, look for a dealer that specializes in buyers with challenged credit. These lenders often finance buyers in-house, so running a credit report may not even be necessary. In this case, the dealer will work with you to determine your budget – specifically, the monthly payment you can afford – and provide you with a handful of quality vehicles in your price range that you can choose from.

Many used car dealers also have access to third-party lenders that have special programs for lenders with substandard credit. These loan programs are designed to adapt to monthly budgets and come with reasonable terms and a variety of time periods, depending on what buyers can afford. Typically, buyers make payments directly at the dealership, and some payment plans can stretch to include smaller weekly payments.

Another source of stress – the down payment – is another flexible factor offered by this special segment of used car dealers. Most dealers offer low down payment plans for cash-strapped buyers, often as little as $1,000 down, but some even have access to zero-down-payment finance programs. The good news is, if you find the right dealer, they’ll guarantee your approval, taking a lot of stress out of the car-buying process.

A pencil is sitting on a form that reads 'credit scoring.'

Improving Your Credit Score

The good news is, every single payment that you make on time will have a positive effect on your credit score. In that way, an affordable car loan is beneficial. It also happens pretty quickly. Typically, you can improve your credit score after making as few as six on-time payments. Used car dealers that specialize in financing customers with bad credit can help you select a loan with an affordable payment, ensuring the end result is better credit for you.

An improved credit score also means you’ll have access to better loan terms, so refinancing a high-interest loan is possible after your score has improved. It’s these baby steps that can get you back to good financial health, especially when you choose the right dealer who understands your situation and has experience helping people like you who want to improve the health of their finances.

Most buyers also have a car to trade in, albeit a poor quality one. Used car dealers take trade-ins too, and that little bit of cash applied to your next vehicle purchase could make a big difference. It might bump you into a higher quality selection or get you a shorter loan term. Leasing is even an option for credit-challenged buyers and has the same potential to improve your score over time.

Dealing with bad credit doesn’t have to mean relying on a less-than-reliable car – in fact, you’re still in a great position to improve the quality of your ride. All it takes is finding the right partner, one with the experience and connections to get you in the right loan and a high-quality, reliable vehicle that gets you where you need to go. It’s critical to find a reputable dealer you can trust because financing buyers with bad credit is tricky.

Take a deep breath and know that your options are still wide open. You still deserve access to great vehicles and a team of experts that can help you get financed. The best used car dealers know how to guide their buyers toward not only finding a reliable car but towards improving their credit score in the process. After all, everyone deserves a second chance.

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