How can I buy a car with bad credit is a problem many people face. Buying a car with bad credit is not a good a good idea. People that have bad credit and then go buy a car typically pay anywhere from 18% to 23% in interest! When you calculate the interest cost over a 5-year auto loan, you’re probably paying twice the cost of the vehicle! That’s CRAZY!
According to Consumer Affairs
In general, it is better to go with a bank or an auto financing lender rather than the car dealership down the street that is offering a “buy here, pay here” deal. If you do wind up with a high interest rate on your car, work on rebuilding your credit score so that you can eventually refinance
So what if you find yourself in need of a car and have bad credit?
If you suddenly find yourself without a car you might be asking, “How can I buy a car with bad credit?”, well, You DON’T! I know not having a ride can be a problem, like how do you get to work, or what if you want to go out? Well as far as getting to work goes, see if a work colleague lives near you and chip in on some gas for a ride. As far as getting out from time to time, there’s always Uber.
You want to give yourself a few months to save up some money. This way you can pay cash for a vehicle until you can get your credit to a point where you can get a 6% or less interest rate. Your selection of vehicle and the total cost for the vehicle will be a lot less. Here is an example based on $35,000.00 vehicle purchase at 6% versus 20% on a 5-year loan.
As you can see your paying about $15,000.00 less at 6% interest rate. And your monthly payment is approximately $250.00 less per month!
OK let’s play a little game. What if you took that $250.00 per month that you’re NOT paying in interest and invested it each month over the same 5-year time period?
In this scenario you end up EARNING $3000.00 instead of PAYING $15000.00. I’d say that’s a pretty good argument for doing everything you can to avoid a high interest car loan.
Instead, put ALL the resources into getting your credit fixed. This will help position you to buy at a good interest rate with minimum money down. This will save you a ton of money and you won’t regret it!
If you are considering purchasing a car in the near future and have some credit challenges, be sure to check with one of our credit expert to see how you can improve your credit.
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