TIPS ON BUYING A VEHICLE WITH POOR CREDIT

In buying a car with poor credit, income becomes a major determining factor. Dropping down to a lower priced vehicle might be necessary to get financing approved. To better your chance of qualifying for a car loan, look for an automobile with monthly payments under 16% of your monthly income.

In approving car loans, a completed Credit Applications helps. Fill in every blank possible. Lending institutions use a computer scoring system and give numerical grades based on type or length of employment, length of residence, whether you rent or own, if you have checking or savings accounts, etc. The scoring system gives plus points for complete phone numbers and addresses for family members and friends you list as references. Prepare all materials and information before you even step foot in the car dealership. Job code is very important so make sure to describe your title as stable and professional as possible. For example, "Administrative Assistant" might have a more impressive effect than "Secretary".

Be ready with a larger-than-usual amount for down payment. The more you can put as a down payment reduces financial risks and covers some of the cost a dealer might incur if the car loan goes into default.

Approach family or friends who have more solid credit history to co-sign for you. After a good number of timely payments, the car loan can be refinanced under your name only and the co-signer can be released from financial responsibility.

Consider small car lots which offer in-house financing. These "Buy Here, We Finance, No one Turned Down" type dealerships have more control and are more flexible on whom to extend credit. Although down payments and interest rates are usually very high, these small car lots are a good way to get basic transportation and to re-establish credit.

If you can afford higher monthly payments for a few months, renting a car from a major car dealership might be a viable option. Pay rental fees on time for around 6 months, and then request regular automobile financing from this dealership, using your excellent rental payment record as "credit history".

Many finance companies specialize in signature loans. Some offer even to people with bad credit. This type of loan, alternatively called "personal loans", can be used for whatever purpose and certainly can be directed towards the purchase of a car.

If you have equity on your home or on a piece of real estate, You might want to contact a mortgage lender about financing your car loan. Remember, since you are offering your real estate as collateral, the lender will have claim on both car AND real estate property if you default on your automobile loan.

Inquire if your car dealership offer "recourse loan" financing. In this type of loan, the dealer acts as co-signer on the credit application and as borrower in the bank' s books. Use this a last resort as its terms are usually come with higher down payment and interest rates on your end.