Avoid these mistakes when buying a car with poor credit
One of the challenges that people face after filing bankruptcy is rebuilding credit. In some cases, people need to make major purchases, such as a motor vehicle, while still in the process of rebuilding credit. While it can be challenging to buy a car with less than perfect credit, a lower credit score does not mean that a person needs to take whatever financing terms a dealer offers. People can obtain better financing terms when buying a car with poor credit by avoiding a few key mistakes.
Relying on verbal assurances
People should never rely solely on assurances from the car dealer about the terms of the auto loan. In some cases, dealers will try to gloss over unfavorable parts of the financing, or even might outright try to trick people. Some may try to get a buyer to have another person co-sign the loan, making the co-signer liable for the loan, while telling the buyer that the co-signer would not really be responsible and that it was just a formality.
In other cases, dealers let buyers leave the lot with a vehicle financial agreement that is “subject to final approval.” Dealers often tell buyers in such cases that approval will be easy and it just takes time to get done. Consumers then find out that they were rejected and now have to pay a much higher interest rate.
Shopping without doing research
While those who are trying to rebuild their credit scores can expect to obtain less favorable credit terms than someone with a high credit rating, people do not have to take the first offer that a car dealer makes. In many cases, an auto dealer will give an extremely high interest rate and claim that it is the best offer the dealer can make. However, these dealers are often just trying to make a profit by pocketing the difference between the bank’s interest rate and what the dealer charges the consumer. It is important for people to research the average interest rates for their credit scores prior to going to a car dealership, so they know whether the terms that the dealer offers are reasonable.
Not understanding the terms of the loan
It is crucial for people to understand all of the terms of an auto loan before agreeing to it. They need to know if the dealer tried to sneak in extra items such as extended warranties or gap insurance, whether the interest on the loan is pre-calculated and what the penalties for late or missed payments are. Not knowing such information could lead people back to the financial problems that caused them to file bankruptcy in the first place, rather than help them repair their credit ratings.
Many people who are struggling financially avoid filing bankruptcy under the mistaken belief that they will never be able to obtain credit again after doing so. However, with a little diligence, people can repair their credit scores and credit with favorable terms after bankruptcy. If you have questions about whether bankruptcy is a solution to your financial straits, speak with a board-certified bankruptcy attorney about your situation.