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How to buy a car with bad credit

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Bad credit doesn’t mean you’re a bad person. But it’s easy to feel like one when you get turned down for a loan. That salesman suddenly stops being your best buddy, and you get shooed out the door like a drunk uncle at a wedding. You still need a car to get back and forth to work though. I mean, how else are you going to fix your broken credit?

Although it may seem hopeless, you still have options!

Alright, to buy a decent ride with poor credit, you’ve got to see just how ‘poor’ it really is. Most banks and finance companies won’t touch anyone with a beacon score that’s below 640. But if you’re within a reasonable distance of that magic 640 number, you can still get a car loan. The interest will just be a little higher.

If you’re thinking that 600 would be an improvement, you’re not alone. Over 17% of Americans have credit scores below 620. And 17% is a lot of people.

Pull your credit file from the credit bureaus, and pay their little fee to see your beacon score. Then, scrape together at least $1,500 – $2,000. The more money you can come up with, the better off you’ll be.

Not so bad credit

Assuming that your credit number isn’t below 580, many dealers will be able to finance you through something called ‘special finance’. Designed for hard working people who’ve gotten a little behind, these finance companies focus more on your payment history than your score. If you’re current on most of your obligations, then you’ll probably be able to drive off in a newer vehicle.

A special finance car loan has a higher interest rate than your typical car loan, usually in the neighborhood of a credit card. And you’ll need a substantial downpayment (here’s where that $1,500-$2,000 comes in). But if you need the dependability of a newer vehicle, special finance is a good option.

Oh my gosh-credit

If your credit score is like -640, you’re going to have to settle for an older car and a higher interest rate. This warrants it’s own post so check out these options for really ugly credit.


If you want to avoid car payments altogether, then pick up the local penny paper, and spend some time on CraigsList. You can easily find a good running vehicle for $1,500-$3,000. Just be sure to have a good mechanic standing by to check it out for you.

Cash is always the best way to pay for a car, even if it is older. If you go this route, you won’t have a car payment, and you won’t have to carry that expensive full-coverage insurance, which is a requirement for most financed cars.