A bad credit car finance is a type of agreement or contract whereby you can purchase your desired car through monthly installments. A dealer makes sure that you pay for the interest rate along with the repayment amount before delivering your chosen vehicle. The nature of your credit score determines your interest rates, and this determines your eligibility to get approved for a loan/term sheet to complete the deal.
What does it mean when someone says, “You have Bad Credit”?
When people say “bad credit,” they usually refer to one’s failure in paying off debts on time, thus giving creditors reason to dole out negative remarks about your credibility as a borrower. This could be due to problems like loss of employment, medical emergencies, divorce, and the likes.
They may also mean that your credit report has something negative in it, such as late payments, bankruptcy, or repossession.
How does someone get bad credit car finance?
Car dealerships usually lend money to people with bad credit to buy their desired cars since dealers rely on pre-sales most of the time than anticipated sales after promotion. To prove to these business entities that you are indeed capable of paying for installments on time, you need to present substantial proof of employment and income before they will approve your application for a loan/term sheet. This is not applicable if you’re applying for a co-signer finance where the main borrower is a family member or close friend who does not have a bad credit history.
The Dealership will ask for the following documentation:
Proof of income——pay stubs, employment letters, bank statements;
Proof of residence—most recent utility bill;
Current vehicle registration (if you own one); and
Your Driver’s License.
When applying for car finance with a bad credit rating, ensure that you follow up regularly on your application status. You don’t want to miss out on your perfect car because of poor communication between yourself and the dealer/lender. A lender may need some additional time before approving your loan agreement if they require more information about how you plan to pay back the installment amount every month. Follow up on your application if approved; make sure you are prepared to finalize the deal!
What are the benefits of bad credit car finance?
Car dealerships realize that many individuals have poor credit scores either due to bankruptcy, repossession or default. This is why they understand that selling cars to them can be challenging. Subsequently, it is common for these dealerships to provide greater warranty flexibility and discounts when buying a vehicle with less-than-perfect credit. This means that people can easily buy quality cars even though their credit rating may not be very good.