The Cost Of Car Loans For Bad Credit

If you have bad credit and are looking for a car loan, the options are a lot fewer than if your credit was good. Unfortunately, although there are many “second chance” car loans to be had, those banks like to charge a lot more interest than normal loans. Sometimes, however, there are other costs to getting car loans with bad credit (they cost a LOT).

Everyone makes mistakes. People with bad credit have obviously made at least one or two. So it is ironic that they are the ones that the banks will come after the quickest if a payment is missed. In many states, the lender has the right to repossess a car the day after the payment is late. That’s right; within 24 hours of missing a payment, they can legally have a tow truck in your driveway. Unfortunately, the banks that lend money to those with bad credit are generally known to be much faster to come take your vehicle than other banks. Small used car dealerships that you pay directly are the worst about this, probably because they can make a ton of money by taking your monthly or weekly payment, and then selling the car again later on.

Speaking of small used car dealerships, many of them do not report good credit histories to the credit bureaus. While they are certainly fast to report any delinquencies on the customer’s part, it is not uncommon for an entire car loan to be paid off, every payment on time, with nary a mention on the credit report. Those with bad credit need all the help they can get, and every positive entry on their credit report helps, especially with a purchase as large as a car.

Before getting yourself into a bad situation by using car loans for people with bad credit, at least try to secure some sort of financing before you actually go shopping. Although they sometimes have strict rules on exactly what cars they will finance, you might be surprised at how many smaller, local banks are willing to take a chance on those with credit that isn’t so great. The interest rate still won’t be the best, but it will be better than your typical “buy here pay here” used car dealership, and most banks report both good and bad to the credit bureaus.

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