Car loans for people with bad credit are not easy to find but they
are available. In most cases though, when you have bad credit
you'll have to look around for loan availability, and you'll end up
having to pay more for the car loan interest rates too.
In some cases people with bad credit can get car loans by
going to a dealer. Many dealers however, don't actually give
you a car loan directly. They'll arrange the car loan for you from
a third party lender instead. If the third party lender approves
you for a car loan though, the dealer will then add interest rate
points to the car loan, so they're able to make more money
from the financing you received. If for instance, your credit is
bad enough, you may be approved for a car loan with a finance
company at 20% interest. The car dealer might then add on
another 3%, and tell you that you've qualified for 23% interest
instead.
For people who have really bad credit though, you can't always
get approved for a car loan from standard finance companies.
If your credit is bad enough, you might only be able to get a car
loan from dealerships who actually finance the car for you.
These are often known as "tote the note" or "buy here pay here"
car dealerships.
When people with bad credit get car loans directly from the car
dealer, they usually need to pay a much larger down payment.
They also tend to have many less cars to choose from for
buying, and the cars may be quite old or damaged in some
way. Sometimes the cars available are not in the best running
condition either, so they may need basic work after you've
purchased one.
Before settling for inferior cars and outrageous interest rates
on a car loan, you should first verify just how bad your credit
actually is. Not everyone's credit is always as bad as they think
it is, and you won't know for sure if you don't know what your
credit report looks like, or what your credit score is.
If your credit score is moderate instead of bad, you'll have a
better chance of getting a good car loan with lower interest rate.
If your credit is still bad though, yet not quite as bad as you
thought, you may still be able to get a better car loan.
Bad credit usually means having a credit score of less than
540. If your credit score is higher than that even by a little bit,
your credit is not as bad as you might have thought, and you
may be able to get a car loan from your local bank or credit
union.
Regular banks won't approve people with bad credit for a car
loan of course, and sometimes even if your credit score is not
below 540 they still won't approve you for a car loan. They may
require your credit score to be above 600 or more instead. But
that's why it's important for you to know your credit score before
trying to get a car loan. Once you know your score, and you
have your credit report history in hand, you're better able to
understand which options are available to you for getting a car
loan.
|
|