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How to Finance a Car With Bad Credit

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How to Finance a Car With Bad Credit

When it comes to financing a car, a good credit score is essential. However, maintaining a high score is often challenging. Your credit rating reflects the interest on loans and whether or not you'll be approved for various payment plans, including leasing or financing a vehicle. Fortunately, there are still a few ways you can get a finance plan, even without a high rating.

Know Your Credit Score

Knowing your credit score is the first step to figuring out your plan to finance a vehicle. Typically credit rating can be seen as a FICO score ranging from 300 to 900. The lower this number, the worse your score is. Poor ratings are generally scores around 559 and below. However, the classification can change depending on the lender, but often only by a handful of points.

Things You'll Need

Taking out a lease or finance plan on a car will require a few documents before you start. You'll need proof of employment, your banking statements, a driver's licence or identification document, and a mobile phone.

Learn Your Budget

Knowing your budget and how much you can safely afford to spend on monthly payments is a great start. Trading in a vehicle will lower monthly costs, as will putting a down payment on the car.

Get Pre-Approved Online

Getting pre-approved online is a great option available to you. While not all dealers can handle bad credit, being pre-approved online for specific dealerships opens up a range of possibilities for you when shopping for a new car. Pre-approval helps let you know how much you'd need to pay each month and makes the purchasing process much smoother.

Look at Used Car Options

A used car is a great way to save money and get a vehicle while having a less-than-favourable credit rating. With the benefits of buying a new car almost all there and a versatile range to choose from, it's a great option thanks to Canada's thriving market. Additionally, as used car dealerships operate online, getting pre-approval is easy.

Consider a Down Payment

A downpayment is a percent of the vehicle's cost paid upfront. With a downpayment, the chance of approval for your vehicle's financing plan is more likely. However, as it requires a considerable amount saved up beforehand, this option isn't suitable for everyone. Fortunately, there are plenty of no-money-down payment plans available.

Have Someone Cosign

A cosigner is another excellent way of handling the less-favourable credit score. As someone trusted signs with you, your approval chance increases due to the lessened risk for the lender. Similarly to the down payment, this option isn't available for everyone and requires significant trust between you and the cosigner.

Take Your Time

When trying to finance a car, take your time. There are plenty of options to consider and several ways to go about it. Contact your local dealership, ask questions, and start planning.

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