Buying a car is a pretty straightforward process when you can afford it. Go to a showroom or a dealership, check out a few options, take a test drive and finalize your dream vehicle. But when you lack in funds, the process gets a little tricky. You have to avail a car loan which brings your credit history into the picture. And God forbid if you have a poor credit score, then everything becomes dicey.
Banks and lenders look at your credit score while analysing your application. A credit score reflects your entire credit history including late payments, amounts owed, credit card balances, number of existing accounts. Etc. Based on these parameters, some calculations are done, and your credit score is finalized. Any score below 600 is considered as a poor credit score and getting long term loans for bad credit has a very low probability. In such cases, banks and lenders charge a higher interest rate and huge down payment to secure their finances.
So even if you have a poor credit score, you can still avail a short term loans, albeit with a few adjustments. Here are a few things you can do to try to get the best possible deal on long term loans for bad credit score.
- Do extensive research online, looking around at your options. See what fits in your budget and make a list of requirements about the kind of vehicle you’re looking for. This will help you narrow down a few of your options.
- Look for institutes offering very low-interest rates. Some reputed lenders ply out car loans even for poor credit scores. Check them out and see the deals they’re willing to offer. If in case you have an existing old car, exchange it for a new one. This will help reduce the principal amount and in turn cut down on your loan, as well as interest rate.
- You can also make use of any freely available online EMI calculator which factors in your income, loan amount, down payment, and interest rates to give you an idea of the amount of monthly instalment you’d have to pay. Bear in mind that your EMI should never exceed 50% of your salary.
- You can even change the term of the loan. If you apply for a long-term duration, the monthly interest will be less, but at the end of the loan you’ll cumulatively end up paying more; whereas if your loan is of a shorter duration, your monthly instalments will be higher, but you’ll end up paying a lower cumulative amount. Thus, you can choose the option that best suits you.
You can also try to improve your credit score little by little by making a few changes. Try to clear up outstanding payments and late instalments. Also, if possible, repay a few of your existing debts. This will give you a higher credit score and better your chances of getting a car loan. Also, avoid taking out any loans or mortgages just before applying for a car loan as it will have a considerable effect on your credit score. With these measures, you can be well on your way to availing a long term loan even with bad credit and buy your car.