Some ways you can prove you’re taking your finances seriously

Posted by carry dent on October 5th, 2021

Do you want to buy cars on finance but have bad credit? Bad credit will make it impossible for you to get financing? Bad credit can certainly create challenges for the car buyer, but it does not necessarily mean you’re out of luck. You may just need to take a few steps to prove that you’re a trustworthy borrower. The problem with a bad credit score is that it’s a red flag for lenders. It can indicate that the potential borrower has no borrowing history, doesn’t pay their bills on time and has borrowed more money than they can afford to pay off. Lending to people with that kind of history can put the lender at risk of losing money. 

Lenders don’t want to lend to someone who won’t pay them back, so they may choose not to lend to those risker borrowers. Hence, there are several lenders, at smaller local credit unions/banks, who takes a chance on someone who has simply hit a rough patch. 

How Can You Prove You’re Worth The Risk?

Lenders want to see that when you’re taking the steps towards financial stability and committed to taking responsibility for your purchases. Lenders understand that a good person hit hard times that force them into poor financial situations. As long as you can show that you’re coming out of those hard times and making a serious effort to unfasten past financial mistakes, some lenders will work with you on financing. 

Here Are Some Ways You Can Prove You’re Taking Your Finances Seriously:

  • Start to clean up outstanding debt- Your current debt reduces the amount of money you have each month to pay a car loan. It’ll depend on the amount of debt you have, and you’re making regular payments, it’ll also be hurting your credit. You don’t have to get free of your debt before talking to a lender, but your lender will definitely see whether you’re capable of improving your credit and your overall financial health. If you’ve outstanding bills, reach out to your creditors and get on a payment plan.  

  • Gather three references from non-traditional creditors- Do you have records of paying your phone company, utility provider, landlord, etc on time every month? These types of non-traditional lenders won’t hit your credit report, they’re a good way of proving a history of financial responsibility to your lender. Collect reference letters from creditors and present them to your lender to show that you’re meeting these financial responsibilities. 

  • Save money down- Purchasing the car before saving money means you’re showing that you’re willing to put some skin in the game. Down payment will reduce the amount of interest you pay throughout the loan.  

  • Get a cosigner- Having someone as your cosigner will give you accountability will help you to build your credit score. It allows you to benefit from the credit score of your cosigner. One con of a cosigner is that case if you miss payments, you can quickly destroy the credit score of your cosigner. If you go with this route make sure you pay those payments on time. 

Conclusion- If you’re a car dealers bad credit, your lender will charge you a higher interest rate. The higher interest rate protects them, to some extent, against the risk of lending to a borrower with low credit or bad credit. Hence, the better your credit scores get, the more open your lender may be to offering you a better interest rate. 

Source URL: https://www.freedomcars.com.au/


 

 

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carry dent
Joined: February 1st, 2021
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