Cars are the second biggest purchase most of us ever make, where real estate is the first. Unlike homes, cars are something many of us buy every few years. This means that any tips you learn to save money on the purchase and financing of vehicles will yield savings year after year. Here are a few tips for saving money on bad credit car loans.
Clean Up Your Credit before Car Shopping
Take the time to review your credit report before you start car shopping. Don’t dispute legitimate debts on the credit report in an attempt to game the system. Instead, review the report for issues you need to resolve. Pay that credit card with an annual fee you forgot about. Get caught up on your payments and make the next few months’ of payments on time and in full. When your credit score and payment history looks better, you may not qualify as having bad credit anymore. Or you’ll at least have more leverage when negotiating the loan terms.
Comparison Shop Lenders as Well as Cars
When we decide that it is time for a new or new to us used vehicle, we often invest hours in researching various makes and models. This is worthwhile, since it allows you to decide what features are nice to have relative to features you must have. It gives you an idea of what the vehicle you want will cost, both new and used. Know what you can afford, and decide now which features any vehicle must include. The same is true when you research lenders. You can find out which institutions charges people far more for a bad credit car loan relative to those with good credit. Don’t make the mistake of over-paying for your car loan when you took such care to save on the vehicle itself. Visit a lender who will give you a deal on your car loan for bad credit.
Know What to Avoid
Suppose the car dealer offers you an affordable car payment. Don’t let them bill you for a car delivery fee, vehicle cleaning fees, stripes and protectants applied after you close on the purchase or an extended warranty. If there is a difference between the monthly payment and what you can afford, round up the car payment with that extra money going to the loan principle. You’ll cut months or years off the life of the loan.
Don’t Skip a Payment
This advice takes several forms. One is to never miss a car payment; the lender will charge hefty penalties if you’re late on a car payment and try to make up for it later. Another variation of this advice is not to take the dealer’s offer to skip a payment the first month you own the car. They make it sound like a deal. It seems as if you’re driving the car for free. In reality, you’ll owe that payment later with interest. They make money off that seeming convenience. On the flipside, you can pay payments biweekly and cut months off the life of the loan, though you shouldn’t pay them a fee to set up this payment schedule.
Having bad credit doesn’t consign you to driving your current car until the wheels fall off. Follow our tips to save money on a car loan, regardless of your current credit.