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How to finance a car with less than perfect credit

Do you have a credit score that you know isn’t ideal? If so, we’ve got some good news and some bad news for you. The bad news is likely something you already know, in that it can be difficult to find a lender who is willing to approve your loan application. And if you can get your loan application approved, it’s likely you’ll be quoted with paying a high interest rate. But wait: we said there’s good news, too! The good news is that it’s possible to finance a car even if your credit score is nothing to write home about. Let’s find out how.

Check your credit report

You may have earned your lower credit score by perhaps not paying your bills on time, by maxing out your credit cards, or by defaulting on a loan. However, your score might be lower than it should be due to mistakes on your credit report [1]. That’s the reason it’s a good idea to get a copy of your credit report every year from each of the three credit-reporting agencies — Experian, Equifax, and TransUnion — by contacting AnnualCreditReport.com [2].

Once you review the reports, you may be surprised at what you find. Here are some examples:

Once you contact the credit bureaus to fix any incorrect information, your score should go up.

Make a budget

Before you shop for a car, find out how much you can afford to spend each month by making a budget. Write down your net income (how much you have after deductions). Then, list all your expenses. That should tell you how much you can afford. About 40 percent of people [3] are comfortable spending 15 percent of their gross income (how much you make before deductions) on a car payment, and about half would rather keep this number to 5 percent. It really depends on how many bills you have to pay. Once you’ve determined how much you can afford to pay each month on a car loan, you can find personalized financing options and terms at Carvana [4] with their soft pull financing feature, which will perform a credit check that won’t impact your credit score before you go to buy.

The “as-is” car — don’t buy a piece of junk

If you have less than perfect credit, you may be tempted to get the cheapest car possible in anticipation of that higher interest rate. That’s a good plan, but only if the car runs. If you spot a car with a really low price, the seller might make up some story as to why the car is being offered so cheaply and then will probably reassure you that it’s a “great” car. Of course, you’re buying this car “as-is,” meaning you can’t return it if you discover later on that it has problems. This makes it super important to inspect any as-is car before you buy it. If you aren’t a mechanic yourself, take the car to one. At the very least, look at the Carfax report, which tells you important information about the car.

Watch out for shady tactics

Making the loan contingent on buying a ton of extras is a bad tactic that some shady car dealers try to add to contracts. Never agree to this. Unscrupulous lenders might assume that you’re desperate for a loan and will agree to anything. Even if you are desperate for a loan, you don’t have to agree to pay for extras as part of the loan agreement. If you want some after-market services, such as an extended warranty, a fabric protector, or rust proofing, you can most likely get these add-ons cheaper on your own.

How to determine a good loan product

Carvana offers an auto loan comparison calculator [5] that lets you see the average loan rate for your area compared with the rate you’ll get based on your car selections and credit score. That’s a great place to begin your search. The more information and facts you have at hand, the more likely it will be for you to get a good car loan.

Looking for your next vehicle? Search our inventory of thousands! [6]