You may have exhausted your credit card, or you have a few late payments, and you want to buy a car. You are probably wondering whether you are eligible for auto loans in Houston with bad credit. Yes, it is possible, but it might be costly. Therefore, you ought to be careful when shopping for one to ensure you are not overcharged. Here are tips that people with bad credit can use to ensure smooth auto loan approval.
Check your credit
What makes you think you have bad credit? A lot of people assume they have low credit score just because they made a late payment or surpassed their budget. While this may be true, it is important to be sure of your credit score. Your assumption might be wrong.
Work on your score
After ascertaining that you have a below excellent credit score, assess the report and determine what you can improve. At times, there may be mistakes in the report that if fixed, will raise your score. You can give yourself about 30 days to allow settling of the disputes before you embark on shopping. If your score is not very terrible, consider short-term measures such as paying off credit card debts. Such strategies could see you hit the 700-threshold.
Many people are discouraged by their bad credit thus they opt out. Your definition of bad credit might not match that of the lender. Therefore, don’t stay in a cocoon of fear; instead, get out there and shop for a suitable lender. Research on the rates of various lenders and settle for the best.
Search only when you are ready
When applying for loans, the lender is bound to look up your credit score. Every time they check your score, it impacts negatively on your credit report. The good part is that scoring models usually count credit inquiries made in a fortnight. Thus, make sure you are done searching in two weeks. It implies that you should only apply for car loans when ready.
Get newer cars as opposed to older ones
You might be tempted to go for older cars as they cost less. However, loans for older cars attract more interests than those for new vehicles. All the same, one cannot rule out the possibility of getting an excellent deal for an old car. Therefore, it is advisable to consider all available options.
Go for a shorter loan period
Many people consider the monthly payment as opposed to the overall amount; which is a big mistake. You might be attracted to the lower monthly costs for a five-year loan as opposed to a three-year loan without considering the interests. Usually, interest rates are less for short-term car loans, which implies that you will pay less generally. Also, you will have a few extra years which you can use to pay off other debts thus boost your credit history.
Avoid the costly add-ons
The dealer might attempt to convince you to opt for the additional features. Such add-ons include paint protection, VIN etching, and rust proofing. Although they are important, they should not be a priority. Now that you are struggling with your credit report, do not agree to get the add-ons.