It’s not nearly as easy to get bad credit auto loans as it was before the Wall Street crash; however, it is still possible. And while it’s possible, it’s not advisable. There are numerous pitfalls for bad credit auto loans. Buying a car should be an exhilarating experience. But auto loans for people with bad credit are often a nightmare. The interest rates are insanely high, the loan amounts are critically low and often down payment is nearly half the loan amount.

When a person with bad credit applies for a car loan, there are several factors considered for approval and terms. The people with the worst credit are either denied the loan or given a loan with the maximum allowable interest rate. Even with higher income brackets, a person can be charged 15%-30% interest on a car loan. The lender, or loan broker, will also tack on late fees, clauses that raise interest for late payments and require high cost payment insurance (insurance which covers the payments should you be unable to make your payments through loss of your job etc). Dealers take advantage of people with bad credit because they know they are in a dire situation. While the best option is to improve your credit rating before you buy a car, many people need a car to commute to and from work. If this is the case, know the right information before you buy.

Auto Loans Bad Credit Workarounds

Once someone decides on auto loans for bad credit, the trick then becomes to get the best deal possible out of a bad situation. Here are some tips:

Get a free credit report. Everyone is entitled to a free credit report, but those will not always give you the information you need to negotiate a better contract with a lender. You need to find out the credit score you have at the moment. A bad credit borrower has a score between 550 and 680. Anything below that and the possibility of a loan is out of the question. Above 680 and you can get a loan with the lowest financing available.

Expect to pay up to 23% APR (annual percentage rate) if you’re credit score is at 550. Not only will your interest rate be higher, but so will your insurance. Be sure to calculate that into your monthly payments.

Get approved for a loan amount before you buy the car. Dealers make more money when you spend more money or when your interest rate is higher. You’ll get a better interest rate by getting a loan guaranteed at a lender before you shop for the car. You probably won’t get that Porch you wanted, but you’ll get a serviceable car at a lower interest rate.

Use your bad credit auto loan to get the most serviceable automobile at the least cost to serve in the interim and build your credit. In other words, buy a cheap car that you can make the payments on for a year. Make your payments on time for 12 months and you can raise your credit score, possibly enough to negotiate a new contract and buy a better car.

The best option for anyone with bad credit, not in dire need of a car, is to repair their credit before making the purchase. Simply using a secured credit card can raise the credit score enough in 12 months (if payments are made in time), to get a lower interest rate on their car loan.

Similar Content:

  1. Bad Credit Auto Loans Aren’t Smart At All Bad credit auto loans are a dangerous proposition. They have high interest rates, poor terms (like early payment penalties) and...
  2. Getting Auto Loans For Bad Credit – A Guide Do I think you should do this? No. It’s a bad idea. That said, this is how you can...
  3. Crazy Interest – Auto Refinance Bad Credit Suffering from bad credit is frustrating and best and embarrassing at worst. It makes it nearly impossible to buy anything...
  4. Car Loans for Bad Credit Are Crazy Expensive One of the hardest deals to negotiate is car loans for people with bad credit. A brand new car can...
  5. Unsecured Loans For Bad Credit Are Almost Always A Bad Deal There are many types of loans available for consumers with bad credit. There are secured loans, unsecured loans, payday loans,...

Tags: , , ,
Share this post on: