If you have bad credit, you may think that getting financing for a car will be impossible. The good news is that it is not. There is no minimum credit score requirement to get a loan. The bad news is that with a traditional auto loan, your terms will not be as favorable. You will pay significantly more over the life of the loan than someone with better credit.
What is a credit score and why is it important?
A credit score is a formula used to predict how likely a person is to pay back a loan. This formula takes into consideration things such as a person’s length of credit history, bill-paying history, current debt, number and type of loan accounts, how much of their available credit the person is using, and more.
Companies in the US use credit scores to decide on whether to approve an applicant for a credit card, mortgage, auto loan, etc. and those with better credit scores get more favorable terms and lower interest rates.
Credit scores range from 300 to 850. If you have made some mistakes in the past, or you simply don’t have a lot of credit history, you are in good company. According to Experian’s 2019 study, 34% of Americans have a poor to fair credit score of 669 or lower.
3 Tips for Financing a Car with Bad Credit
- Finance your car through Savings Club. Savings Club is a simple, easy, and convenient way to finance a car. We have built a system that helps buyers reduce the cost of buying a new car through group savings. By financing your car with Savings Club, you can save up to 10% compared to financing through a traditional auto loan.
- Plan your budget. When you buy a car, one thing you should take into consideration is what the monthly cost of having the car will be. Figuring out your monthly payment, including your financing payment, insurance, gas, and upkeep, is a critical first step in the car-buying process. This will dictate what monthly payment you can afford. The more expensive the car, the higher the monthly payment you’ll need to pay.
- Build credit. Use your vehicle financing to build up your credit. When you finance your car through Savings Club, we report each monthly payment to the credit bureaus, so financing through Savings Club is not only a great way to purchase a vehicle, but it will also help you build up your credit score along the way.
If you have a poor credit score, you may think that it will be difficult to finance a car and that, even if you can, you will need to pay an incredibly high-interest rate. Not true! Savings Club is here to help so that you can stop dreaming and start saving!