Credit Repair for Car Loans
Everyone needs to have a reliable car in the modern age. So much of what we do requires that we travel distances that are only practically achievable by owning a car. However, recent economic troubles and other factors mean that many people have less than perfect credit. This bad credit history can create serious complications when you need to take out a loan on a new car. We’ll explain what happens when you try to get a car loan with bad credit, why it’s easier and better to get a car loan for people with good credit, and how credit repair services can help.
Getting a Car Loan with Bad Credit
There are many pitfalls when it comes to obtaining a car loan with sub-optimal credit. A poor credit history will make your car more expensive over the course of your loan, possibly by tens of thousands of dollars. Moreover, a bad credit history can make your car more expensive upfront, and you may even be denied a car loan because of your bad credit.
Higher Interest Rates
The first problem with obtaining a car loan with bad credit is that you won’t get favorable interest rates on your loan. Interest rates are how lenders make money on loans. Rates are calculated using a series of factors, but your credit score and credit history are the biggest influences on the interest rates you’re offered.
Interest rates are used to reflect the level of risk that a lender is taking by giving you the loan. The more likely it is that you won’t be able to repay the loan, the more the lender has to charge to make taking the risk a profitable decision. Lenders use a borrower’s credit history and credit score to determine how much of a risk they are when setting interest rates. If your score is low, then car lenders will see you as a greater risk. As a result, they’ll charge a higher interest rate. The higher interest rate means that you’ll pay more for your car over the course of the loan.
Higher Down Payment
Another consequence of a lower credit score is that car lenders may demand that you put down a larger down payment for your car. A down payment is the amount of money you have available to put toward the price of your new car now. Borrowers with excellent credit histories can get by with a lower down payment, saving them money on the front end of the car buying process.
However, when your credit history is poor, lenders might require that you put down even more money. This can have several negative effects. First, the down payment that the lender wants might be more than you can afford, which essential puts a new car loan, and thus a new car, out of reach. Moreover, a higher down payment can cut into your savings, making you more vulnerable to unforeseen events like medical bills.
Denied for a Car Loan Because of Bad Credit
The final implication of a poor credit score is that you can be denied a loan for your new car entirely. As a result, you’ll lack the reliable transportation you need to do things like go to work or take care of your family. The result can be devastating for families and individuals. Moreover, being denied a car loan can put you in embarrassing situations like having to bum a ride or asking friends and family for money, and no one wants to go through that.
Benefits of Good Credit for Car Loans
While having bad credit can make getting a car loan more difficult, having good credit can make getting a loan for a new car much easier and cost-effective. After all, money not spent on a new car loan is money that can be saved for a rainy day or even invested to help grow your wealth.
The first benefit of a better credit score when it comes to car loans is that you’ll be offered more favorable interest rates. Lower interest rates can save borrowers thousands, or even tens of thousands of dollars on a new car.
Lower Down Payment
Another benefit of a better credit score when it comes to car loans is that the lender will likely require a lower down payment. While you can still make a larger down payment to reduce the overall cost of your loan, having a lower down payment as an option means that you can ensure your down payment doesn’t drain your savings. You can use the extra money to have around for a rainy day, or you can invest it so that it can grow.
Credit Repair for Car Loans
Credit repair can help you get better terms on a car loan, or even help you qualify for a car loan in the first place. Credit repair works by helping to clean up your credit report and credit history. A qualified credit repair specialist can show you how to challenge inaccurate and harmful entries on your credit report. Getting these entries removed is a great way to give your credit score a dramatic boost.
Moreover, credit repair also provides a better understanding of your legal rights as a consumer. You can learn how to file verification requests, or even have the credit repair service file them on your behalf. Oftentimes companies are not able to demonstrate that the claims they are making are true. US law dictates that unless a credit report entry is 100% verifiable, it cannot be included on a consumer’s credit report.
As a result of these and other tactics you’ll get from credit repair services, your credit score will increase. Therefore, you’ll get better interest rates without having such a large down payment requirement. Moreover, boosting your credit score can get you from a place where no lender will qualify you for a loan to a point where lenders are practically tripping over themselves to offer you money for a new car. Make sure that you’re getting the best deal possible when shopping for a new car, and use credit repair services before you attempt to obtain a car loan.
Sean brings a decade worth of experience in credit repair to our company. Sean started his career working in an accounting department for a major credit card company. This was a natural fit, given his bachelor’s and master’s degrees in accounting.