17 October 2017
4 Ways to Get Lower Rates When Applying for Car Finance With Bad Credit
Most people with a poor credit score will find it difficult to get a car loan with low interest rates. Since most lenders who offer bad credit car finance will be taking a higher risk when offering a person with bad credit a loan, the interest rates are usually high. In fact, it could be between 20 to 48%. However, it is not impossible to get a reasonable rate on a car loan. Here are some expert tips to help you increase your chances of reducing your interest rate.
1. Make a Large Down Payment
Saving up cash can help to reduce your interest rate. When you are negotiating on the terms of your car finance, you can offer the lender an incentive to lower your interest rate by making a substantial cash deposit. Lenders will see you as a less risky client because of your deposit. This works for both dealers and banks. A deposit reduces the value that needs to be financed with a car loan, so your lender will be exposed to a lower potential loss. If you default on your payment, your lender will easily auction or sell the car to recover their money.
2. Opt for a Shorter Loan Term
Another reason why bankers and lenders will reduce your interest rates, when you put down a substantial deposit, is because it could shorten the loan period and demonstrate your commitment to pay back the loan. Most lenders believe that you will not want to walk away or stop your loan payments due to the amount of cash you have invested at the initial stage. From research and statistics, most loans that are accompanied with large initial deposits are paid off faster than loans that have a minimal down payment.
3. Have a Stable Employment Profile
Having a regular source of income is one of the best ways to assure a lender that you will be able to payback your loan. Without a clean credit history, you can still show your lender that you have the capacity to payback your loan if you have stable employment. Stable employment means that you are a permanent member of staff at your company or organisation. It also means that you have been working in your present organisation for at least two years. With a stable source of income, you should be able to determine your current monthly disposable income and take a loan you can easily repay.
4. Develop a Regular Savings Habit
If you are planning to obtain bad credit car finance for a new or used car, you should start making regular savings in your bank today. First, it will help you to accumulate a lot of cash to make a large initial deposit, which you can use to negotiate for a lower interest rate. Then, your savings will also serve as a source of assurance to your lender that you have sound financial management. With a continuous savings habit for up to 12 months, you can show your lender that you will be able to pay the loan back without defaulting. Ask Rent 2 Own Cars about their Deposit Building Program
Obtaining a relatively low interest rate on a car loan with bad credit is not an impossible task. You can use these tips to have a better negotiation with your lender or car dealer.