Just because you need a car does not mean that you are in the perfect situation. You could find yourself in need of a car after a job layoff or after incurring huge medical expenses. This may mean that you need car financing with bad credit. Unfortunately, there is a stigma attached to bad credit car financing, and with it, there are a lot of myths. Here are three common myths that you should know about bad credit car finance and the truth surrounding them.
Lenders Won't Work With Individuals With Poor Credit
One of the biggest myths out there is that most lenders won't work with individuals who have poor credit. 20 to 30 years ago, it was significantly harder to get financing for a car loan with bad credit. You often had to go to buy here, pay here lots. But thanks to technology, lenders assume less of a risk when giving a loan to those with poor credit. They can easily track the car to repossess it if you don't pay and they can even remotely shut the car down until the payment is made. As such, more and more lenders are lending to those with bad credit simply because there is less of a risk associated with these loans these days.
Taking Out a Car Loan With Poor Credit Will Further Hurt the Score
Another common myth related to bad credit car financing is that you can hurt your credit even more by taking out a car loan. Many people think that if they have poor credit, assuming more debt will cause their score to plummet. However, taking out a car loan and making your payments on time every month can actually help to improve your score.
Shopping Around For a Car Loan Can Hurt Your Credit Score
The last myth related to bad credit and car financing is that you can lower your score by shopping around for a car loan. When a lender performs a hard pull of your credit report, your credit score does go down. However, lenders can tell you whether you will be approved for a loan or not, and at what amount and interest rate, by doing a soft pull. A hard pull does not need to be done until they are getting your pre-approved for the loan or financing it. This means that there is no reason why you shouldn't shop around for a car loan, even if you have bad credit.
Lenders have come to realize that people are not perfect. And those with bad credit are still likely to pay their car payment to ensure they can continue to own and use their car. If you are in need of car financing and have bad credit, don't let common myths discourage you. Visit your financial institution or a car dealership to find out how they can help you get behind the wheel of a car today.
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