Repossessions are tough to recover from, and this fact will inevitably arise when you’re trying to buy your next car with an auto loan. But, it’s not impossible to buy a used car if you’ve had a repossession. There are steps you can take to make the process easier, and it’s always best to plan ahead.
Check Your Overall Credit
Even though you have a repossession on your credit history, the overall picture might not be as bad as you’ve imagined. It’s a good idea to get an accurate view of your credit, so you can see how you look through the eyes of a lender. You may be thinking that your repo is all that will stand out, but having some good things on your report can help to offset the issues of your past.
Fix What Can Be Fixed
If there are items on your credit report that can be fixed, you should work on them until they are resolved. Common issues that you can repair on your own include disputing incorrect information, making your payments on time over the course of several months, and ensuring that you’re not using too much of the credit you have available to you.
It can be a long process, and patience is definitely a virtue here. If you urgently need a new car, take a step back and consider the overall situation. If at all possible, give yourself enough time to improve your credit the right way before getting stuck with too high of an interest rate on your auto loan.
The Down Payment
Your down payment will matter more when you have a repossession on your credit, so it’s a good idea to save up until you have 20% of the purchase price available. This will show the lender that you’re able to save money, which proves that you have some money left over each month after you pay your expenses.
If you had good credit without a repossession, you might only need to put 10% down or even less. It’s unfortunate, but submitting a larger down payment is one major thing you can do to show that you’re financially sound.
Gather up all of the documentation you will need in order to apply for a used car loan so that you don’t show up to the dealership unprepared. Make a good impression by having everything you think they might want to examine on hand in order to make a credit decision.
Some basic items you’ll want to have include a valid driver’s license, pay stubs, and proof that you’re insured. You’ll also want to bring a utility bill with you. If it’s your first time doing business with this dealership, you want to show them that you’re organized and you know how the process works.
Maybe you’ll be over-prepared, and that’s totally okay! Some lenders will just want a valid driver’s license and proof of employment. If you show up with more than you need, you’ll never end up regretting it.
Know Your Budget
You don’t want to have the same situation on your hands as you had before, so be sure that you have analyzed your budget beforehand. Choose a used car that you can afford easily. This may mean that you don’t get the exact car that you want right now, but it’s best to go with something that doesn’t cause stress each month.
Assess how much you’ve spent each month over the last six months or more, and get a realistic look at all of your regular expenses. It may be tempting to tell yourself that you will just cut back in a few areas in order to afford the car, but in reality analyzing the last six months will give you an accurate view of where your money actually goes. Be honest with yourself, and don’t get in over your head.
Choose the Right Dealership
There are many different types of used car dealerships out there, and each one specializes in different areas. You’ll want to go with a dealer that works with people who have bad credit so that you have the best chance at getting approved. And remember, it’s not just getting approved that you should be concerned with, it’s getting the best rate based on your credit.