Most consumers’ credit history isn’t spotless and their credit score isn’t perfect. Life happens. Sometimes life includes bankruptcy, consumer proposal, or unexpected expenses. Carrying a large amount of consumer debt can negatively impact a consumer’s credit history, contributing to a low credit score. Given past or current credit situations, a majority of consumers aren’t able to buy a vehicle outright, so financing is a viable option.
Despite bad credit, a reliable vehicle is a necessity of daily life for many Canadians. There are numerous reasons why a car can be a necessity – a poor transit system, your car is on its last legs, your lease is ending, or maybe you’re looking to become a first-time vehicle owner.
If your credit score is below average – or maybe it’s bad – know that you’re not the only one. Many consumers fall in the less-than-perfect credit score category. An average credit score sits around the 680 mark, with anything under 650 considered low. A credit score under 500 is considered bad credit. If you know where your credit score lands, but are not familiar with the factors that determine your score, myFICO is a great resource to educate yourself and help improve your financial wellbeing.
Even though some traditional lenders won’t let consumers finance a vehicle with a low credit score, know that, yes, it’s possible to finance a car with a credit score of 500. The reason why some lenders won’t give consumers with bad credit scores access to financing is because of the risk factor. Traditional lenders, like banks, see a low credit score as a risk that consumers may default on their loan payments. However, there are financing options available for people with a range of credit scores, even with a credit score of 500.
How can I finance a car with a credit score of 500?
It’s possible to finance a car with a credit score of 500. A consumer’s credit score doesn’t always illustrate the full picture, and that’s why there are lenders out there, to help people like you, find a reliable vehicle. To get auto financing with a low credit score there are a few things to consider.
Your current monthly income
Assessing your monthly income and expenses can give you a sense of what type of car will work for your needs and budget. Compare all your current expenses and payments with your income, to ensure the vehicle you have in mind won’t stretch your finances too thin.
See what your bi-weekly or monthly car payments could be with this Car Loan Calculator. Just select the approximate vehicle price, length of your loan, and your credit score range, to determine if payments will fit into your budget.
Saving a down payment
Saving as little as $500 for a down payment on a vehicle can help get you in the driver’s seat. Even a small down payment can contribute to lower monthly or bi-weekly instalments, especially if you opt for a pre-owned car. Additionally, a down payment helps show lenders that despite your credit score, you’re able to be financially responsible and able to save. So, aim to make a down payment that’s approachable for you.
New or pre-owned vehicle
A new car with all the bells and whistles might be a tempting decision to make. However, opting for a pre-owned vehicle might be the best option if you have a low credit score. Opting for a used vehicle over a new car can offer some great benefits, including:
- A lower overall amount financed
- A better interest rate on financing
- More affordable monthly payments
If you’re unsure about choosing a used vehicle, keep in mind that dealerships have their reputation on the line. You won’t end up with a junky, unreliable car. There are plenty of great pre-owned cars, trucks, and SUVs available.
Once you’ve assessed your financial standing, decided between a new and pre-owned vehicle, and potentially have a down payment saved, you’re likely ready to start the process of financing a car loan. Know that regardless of where your credit score lands, it’s possible to find the right, reliable car to fit your needs and lifestyle. Get the freedom to get driving right away, apply online for a RightRide car loan.