How to Buy a Car with Bad Credit
Even though you have poor credit with a low credit score, you still need to have access to reliable transportation. Yet, getting approved for an auto loan with bad credit can be challenging. You might be surprised to learn you are not alone, and that there are many other people who also need reliable transportation but have bad credit.
Fortunately, there are several things you can do to ensure you get approved for auto financing with bad credit, like a buy-here-pay-here loan from our vehicle pawn shop. This type of loan is a great solution to the bad credit problem when you cannot wait to get a car. You can still get approved while working on improving your credit history and credit score.
1. Get copies of your credit reports.
Everyone can request free copies of their credit reports from the three major credit bureaus. You can get free reports annually or if you were denied credit. It is worth your time to check these out to see what is on your report.
Sometimes credit reporting agencies make mistakes. If you discover anything that is not yours or which is not accurate, you will want to dispute it. You can file a dispute online or by filling out and mailing in a dispute form. Resolving disputes can take some time, but doing so can help increase your credit score.
2. Consider a Buy-Here-Pay-Here (BHPH) Program to finance your car.
With a BHPH program, your credit and credit score are not the determining factors in approving your car loan. The reason why BHPH lenders do not care about your credit score is that you are using the vehicle as collateral to secure the loan.
3. Work on resolving derogatory/negative items on your credit report.
Deciding to use a BHPH program to finance your vehicle so you do not have to wait on fixing the items on your credit report is a good idea to get a car now, although, it can be helpful to attempt to resolve any outstanding debts that are impacting your credit score. For these outstanding debts, you want to look at their age—i.e., how old are they?
Items that are more than six years old—except for student loans—are past their statute of limitations to be collected in Colorado. What this means is—other than the moral obligation to pay back the debt—the original creditor cannot sue you for the debt. Essentially, you could decide to not pay the debt and just wait for it to fall off your credit report.
• Credit Repair Tip: Be careful of “collection settlement offers.” Collection agencies will typically offer to settle your outstanding debt for less than what you owe. What they do not tell you is the difference between the original amount owed and the settlement offer is considered forgiven debt. This amount can be taxable income and could affect your tax return.
4. Why buy a car from a BHPH dealership?
There are several benefits of purchasing your next vehicle from a buy-here-pay-here car dealership. The primary one is you do not have to worry about your credit history or credit score.
All you need to finance your vehicle from a used car dealership are the following:
• Proof of Income
• Proof of Employment
• Valid Driver’s License
• Short List of References
• Proof of Residence
• Down Payment
With the down payment requirement, the amount can vary, based on the total purchase price of the vehicle. If you don’t have a down payment, it does not mean you cannot still buy the vehicle. One option is to use our layaway program. With this program, you put a portion down and have 90 days to pay off the rest.
If you already have your down payment, then buying a car is easy and simple. You visit one of our Colorado locations, pick the vehicle you like, take it for a test drive, and complete your loan paperwork. Since we are financing the vehicle, you do not have to wait for a decision. In most cases, you can even drive your vehicle home the same day!
Other benefits you gain by financing your vehicle using our BHPH program can include:
Flexible Repayment Terms: You set the repayment terms that best work for you. You can choose between bi-weekly or monthly payments. Additionally, you may be able to negotiate the repayment period for the car loan that fits into your budget. If you need a five- or six-year loan, you can let us know, and we can work with you to create a loan that can help you make your payments on time.
Low Down Payments: Most people assume, when they have bad credit, they will need a huge amount of money down to get approved. Not with BHPH programs! If you only have a small down payment, that is okay. In some cases, your down payment may only amount to one month’s car payment.
Comparable Interest Rates: People with bad credit know they are going to have a higher interest rate compared to someone with good credit. At our used car dealership, our interest rates are comparable to the interest rates you would find in other car loan programs for people with bad credit.
What advantages do BHPH programs provide car buyers after the sale?
The benefits of a BHPH program do not stop the minute you drive off the car lot. In fact, you continue to enjoy several benefits while driving and paying off your car loan, such as:
You have the reliable transportation you need. You need a vehicle to get to and from work to earn a paycheck to pay back your auto loan. You also need to go the grocery store, get the kids to and from school, and other such errands. With your BHPH loan, you are able to get a reliable car to get around town.
Access to newer vehicles when you need another one. Eventually, the car you bought with a BHPH loan will need to be replaced. When that time comes, if you still have bad or poor credit, you can get another car from one of our Colorado vehicle pawn shops! You may even be able to trade in your current car, by reselling it back to us and using that cash as your down payment on your next vehicle.
Dos and Don’ts of Bad Credit Auto Loans
Do make all of your payments on time. All of your payments are reported to the credit bureaus. When you make payments on time, this helps improve your credit and credit score.
Don’t trade the car until it is paid off. Chances are you will owe more on the loan than what the vehicle is worth. If you trade it in, you will go upside down on your next car loan. This will increase your payments and can create financial struggles.
Do know how much car you can afford. You want to choose a car and a car loan that fit your budget. Overextending yourself is never a good idea. You could end up with a repossession on your credit, which will only hurt it more.
Do read all of your loan paperwork. Before signing on the dotted, line, read through the loan contract terms and conditions. If you have any questions, this is the time to ask them.
Do keep full coverage insurance on the vehicle. If you get into an accident and your vehicle is damaged or totaled, you are still responsible for making payments on it. With full coverage insurance, your insurance company will either pay to fix the car or pay off your car loan.
Don’t take on additional credit if you cannot afford it. As your credit score improves, you may get offers to apply for credit cards. While tempting, you could find you have more money going out each month on debt payments than you can afford. Concentrate on paying off your car loan first.
Do keep up with your vehicle maintenance and repairs. Oil changes, brake pad changes, tire rotations, engine tune-ups, and other maintenance will help your vehicle last longer. Ignoring problems does not make them go away. If your car breaks and stops running, you are still required to pay off the loan.
Just keep in mind, some of the things you can do to improve your credit do take a little time before you see results. Don’t worry. As long as you are making your car payments on time, your credit will gradually start to improve, as long as you have no new negative items being reported.
To check out the latest selections of vehicles you can buy from our car pawn stores with our BHPH loan programs, please feel free to stop by your nearest Massa Auto Pawn & Sales location, browse our inventories online, or call us at 720.598.0081 today!