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Advice for Bad Credit, Unemployed Auto Loans – Steps for Bad Credit Car Financing for People with Bad Credit

Updated on June 26, 2009

Your Guide on Purchasing a Car with Bad or Poor Credit

The first thing to decide on is whether or not you need to borrow money for a used car or a new car. The probability of receiving a new car loan with bad or poor credit is very uncommon and is normally not the best choice for you, anyhow. The poorer your credit score, the higher your interest charges will be. It’s a good idea to select an automobile that is trustworthy but is much more reasonably priced, this means you should decide on a used car as opposed to a shiny new car. New car loans for people with bad credit usually vary from 5 to even 6 years. Would you want to be caught with a car with an expired warranty for a year or two? That’s not at all a great idea!

By opting for a used car, your odds of finding bad credit auto loans will be much better.

Be Wary of No-Down Payment Offers!

After you've chosen a car that you would like to buy, make certain that you are capable of coming up with as large of a down payment as practicable. Several used car dealerships provide no or very low down-payment car financing options. It might appear as if they are helping you out and doing you a favor, but eventually, this will come back to haunt you as car dealerships typically end up collecting large profits from this attractive guarantee. Even though you will not have to pay something upfront, you will end up paying a lot of additional interest in the whole scheme of things. And, if your credit is really bad, you should expect to pay a down payment of at minimum, 10-15% of the car’s price; be prepared!

Keep in mind - if you are able, put aside some money several months to a year of purchasing your next car to help you with making a large down payment. Not paying a down payment will definitely cost you so much more in the end. Again, if you are a person with bad credit or no credit, you will have to pay a down-payment, anyways.

Shop Around for the Best Bad Credit Auto Loan Rates

After you have found a couple of dependable used cars and have your sizeable down payment, don’t agree to the car dealerships financing arrangement right of the bat. Let them know that you would like to look around first for a good deal at your local credit union. If you can, get a quote from the bank that you currently do business with, first. A good method to use when shopping for financing with bad credit, or any credit for that matter, is to get around five different quotes before choosing your new lender.

Every now and then, you might find that the only entity that will finance your vehicle is the car dealership, itself. They usually work through other banks, but some will participate in private financing to help lower their operating costs. If you choose the option of financing through the dealership directly, you almost always will pay more in interest. Sometimes, however, there isn’t an option readily available elsewhere.

By shopping around for the best auto loan and lending rates, it is possible for people with bad credit to buy cars.


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