Bad credit car financing is one of the most lucrative businesses in the automotive industry today. With the loss of jobs and the general slump of the economy, more and more people are finding themselves unable to pay their bills. This means their credit slides downward. But most people require a vehicle to get to work and sometimes it’s just easier and makes more sense to buy another vehicle than to continue to throw money away on one that is in need of repairs. Since this is such a lucrative industry, buyers should take care and beware of those that would take advantage of their precarious situation.

Buy Here Pay Here: One of the most popular methods of bad credit car financing is the buy here pay here method. These companies often do their own financing. In reality, the down payment for the car is what they paid in full for the car. Payments are made directly to the lot the car is bought from. While financing is easily found, the interest rates for the financing on these types of cars are often outrageous. Buyers will notice that it may take as long as year before a payment they make even touches the principal on these cars. Payments on these types of loans are usually made in weekly or biweekly terms.

Conventional Lenders:  There are conventional lenders who do bad credit car financing. These lenders typically preaprrove the buyer before a car is even selected. The buyer is then usually free to choose their vehicle within the limits of the loan offered. Interest rates on these types of loans may be a bit higher but the payments are made on a monthly basis and they are sent to the lender rather than the lot the car is purchased from. The benefit of obtaining your loan from these types of lenders is that you are building a credit history with them and chances are they offer several types of loans besides bad credit car loans. It never hurts to plan ahead!

Dealers: There are some dealers who will offer bad credit car loans without using a buy here pay here method. They usually require a little more for the down payment and proof of six months worth of full coverage insurance paid in advance. However, the quality of the cars from these dealers tends to be a little higher and they are usually sought out for their reputation of selling reliable used cars.

Individuals: You may be able to get bad credit car financing from an individual, but it’s not recommended. It’s a risky thing to borrow money from a friend or family member, especially to buy a vehicle. It’s all too easy to skip a payment and hope they will understand because you had to put the money elsewhere, like into repairs on the vehicle. Not only do you risk bad feelings and anxiety between friends and relatives, but unless this individual is reporting your payment to a credit bureau, the loan isn’t doing anything at all to improve your credit.