Borrowing 101: Know How to Buy a Car With Bad Credit


It is very much possible to buy a car with bad credit today even when some banks seem to be very unwilling to finance someone who has a bad record with lenders before. There are many lending institutions out there - modern and more daring in taking risks to associate with high risk borrowers like people with bad credit rating. Some of these lenders either offer new car dealerships or "buy here pay here" schemes - it is important then that you know which of the two methods is more suitable for you.

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A new car dealership may be the scheme that is more familiar to borrowers. This scheme permeates the lending industry and so it is not surprising to read ads practically everywhere that a car dealer can finance anybody as long as he's got a hob and can show a proof of residence. Some lenders even promise that the borrower can drive away with a new car just within 24 hours of application.

Unfortunately for some borrowers, some lenders who offer this scheme are only good at giving vain promises. They only run their ads to attract would-be borrowers and when you go to apply for a car loan, you'll be disappointed of the very high interest rates and all the other costs that are bundled in the loan. One part is true however with this scheme; it is definitely much easier and more convenient to take than its counterpart schemes. This is the reason why many borrowers are attracted to it, believing that they made the right choice.

A "buy here pay here" scheme on the other hand entails certain requirements for the borrower to qualify - the more requirements that you accomplish, the lower the down payment is charged to the borrower. The basic requirements in entering such scheme are as follows: 1) proof of stable employment or income, 2) proof of residence, 3) driver's license, 4) insurance, and 5) the down payment for the car loan.

Most lenders qualify an employment as stable if you have been in that employment for at least three months. You will have to submit proofs like your most recent pay stubs along with a letter from your employer. Bank statements and tax returns are also very important to prove your employment and residence.

If you have a bad credit score but can provide all the first four requirements, then you should be ready to pay 25% down payment at the least - this is the price of getting approved for bad credit loans. You will pay less though if your credit rating is good. So, you may want to do something about your credit standing before you decide on your car loan options.


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