Interview With Personal Financial Expert Miranda Marquit On Getting A Bad Credit Car Loan

Can you buy a used car with no down payment?
It’s possible to buy a used car with no down payment, but you might have to accept a higher interest rate and get financing through the used car dealer. Another option is to obtain a pre-approval for a set amount from your bank or credit union, and then choose a car that fits within the amount of the pre-approval so that you don’t have to worry about a down payment.

If a down payment is needed, how much of a down payment should the customer provide?
In the end, it depends on how much you have and what you are comfortable with. In general, I think it makes sense to make a down payment large enough to allow you to pay off the car in three to five years. (A shorter term is preferable if you are forced into taking a higher interest rate.)

Is it possible to purchase a used car with a minimal down payment and also have bad credit?
For cars, there are a number of options for those with bad credit, including loans with no down payment. However, you will probably have to make up for it by accepting a higher interest rate. Anytime you get any sort of bad credit car loan, you normally have to pay a higher interest rate.

If you’re divorced and as a result of that divorce have bad credit, what tips would you offer the customer on how to obtain a loan?
You can write a letter that can be included in your credit file, providing information about the divorce, and the impact that it had on the credit. A copy of that letter can also be provided to your potential lender as an explanation of your circumstances. That can sometimes help you obtain better terms. However, as is usual with these situations, there is a good chance that you will have to accept a higher interest rate or make a bigger down payment in order to get some sort of loan.

If a customer has just declared bankruptcy and they want to buy a vehicle, what do you suggest they do?
If you don’t need to buy the vehicle immediately as a way to get to work, I suggest waiting. Spend the next year or so working on bringing your credit back up to something a little more manageable so that you have a better chance of qualifying for a loan, and/or getting better loan terms.

Should a customer bring any documentation with them before they walk into the car dealership?
Usually all that is needed is a state-issued I.D. Most car dealers will run a credit check if needed and get everything they need from there for a dealer-financed loan. However, you might also need proof of insurance. If you are bringing a trade-in, you need the title and current registration for your trade-in. If you have a loan still on that trade-in, you will need the account number. If you have arranged your own financing, bring in a pre-approval from your lender, or bring in the payment you plan to make.

How long does the credit restoration process take?
The credit restoration process can take anywhere from a few months to a few years, depending on what has happened to your credit, and the steps you are taking to improve the situation. It can take a year or more to begin rebuilding after a major issue, like bankruptcy or foreclosure. In some cases, it can take three years or more to get your credit score up to snuff, and even then, you’ll have struggles related to the length of time these major events can remain on your credit file.

Should a customer run their credit score prior to walking into the dealership?
It certainly doesn’t hurt to check your credit ahead of time so that you know where you stand, and you get a clue that something might be wrong. Your credit score can be a warning that you need to improve your situation before you get too far into the process.

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