Bad Credit Car Financing - Auto Loans for People With Bad Credit
Bad Credit Borrowing
Financing a new car is never a fun thing to do. It's even more of an issue if you have bad credit. Sometimes, bad credit car financing can seem next to impossible. The fact of the matter is that you should be able to get an auto loan if you have bad credit, however - 99% of the time, you'll have to end up paying extra interest in order to make up for the fact that you are perceived as a risk to lenders.
This article will cover tips on financing a car for people with bad credit as well as give you suggestions on alternatives to financing a car. Bad credit car financing is possible, you just need to make sure you search around for the best deal, first!
Bad Credit Car Financing Is A Reality
Lenders and Car Dealerships understand the necessity of owning an automobile and due to present economic times, more and more people with bad credit are able to find auto loans.
Creditors are getting very creative, for example there is a new device being used by car dealerships that is operated remotely and has GPS. If you are up to date with your car loan, a little light will stay green. If you are late, it will turn yellow and if you are past overdue - the light will turn red and your car will be unable to function. Lenders know that devices like these help increase the likelihood of people with bad credit paying back auto loans and they are starting to become very popular. That, combined with a GPS signal, banks can feel more secure about bad credit car financing as they know where the car is at all times.
Steps for the Bad Credit Car Financing Process
First you will need to decide whether or not you are going to borrow money for a new car or a used car. The chances of getting a new car loan with bad credit is rare and is typically not the best option for you, anyways. The lower your credit score, the higher your interest rates will be. It is best to choose a car that is dependable but is much more affordable, this means you should opt for a used car. New car loans for people with bad credit typically range from 5 to even 6 years. Would you want to be stuck with a car that has run out of a warranty for a year or two after the warranty expires? It's not a good idea.
By choosing a used car, your chances of finding a bad credit auto loan is much greater.
Now that you've identified a car that you'd like to purchase, make sure that you're able to come up with as much of a down payment as possible. Some used car dealerships offer "no down-payment car financing". It may seem like they're doing you a favor, but in the long run they end up profiting from this enticing guarantee. You won't have to pay anything upfront, but you'll end up paying lots of extra interest down the road. Furthermore, if your credit is really bad, you should always be prepared for putting down at least 10-15% of the car's price.
Remember - if you can, save ahead for a few months to make a sizeable down payment. Not using a down payment ends up costing you a lot more and isn't an option for people with really bad or no credit.
After you've identified a few reliable used cars and come up with a down payment, do not accept the car dealerships financing deal at first. Explain that you'd prefer to shop around at your local credit unions. Preferably, get a quote from your personal bank, first. A good rule of thumb is to get at least 5 different quotes before settling in with one creditor.
Sometimes, you may find that the only place that will finance your car is the dealership. They typically work through other banks, but some do independent financing to cut down on their operating costs. If this is the case, you typically will pay more if you finance through the dealership, but understandably, there isn't always an option to get a loan elsewhere.
Bad Credit Car Financing Tips
- Always shop around for the best quotes. Never settle for the first offer.
- Always have a down-payment ready, even if you have to borrow from family or friends.
- There are other options besides car dealerships! Check your local classifieds and look on bulletin boards in the community. There are plenty of used cars available that are being sold by the owner. Your bank may agree to finance a used car from a private seller if you are able to come up with a large enough down-payment.
- NEVER lie on a car financing application. Not only is it a crime, it will never, ever benefit you. Some car salesmen may even tell you it's o.k. to exaggerate your income a little bit. What does he care? He's not the one stuck with a payment of $300 a month when you truly could only afford $150 a month.
- Re-evaluate your priorities - do you really need a new car right now or would it be more cost effective to find an affordable mechanic to work on your current vehicle? If it's not an absolute priority, start saving up for that down payment!
Hopefully these tips for auto loans for people with bad credit will help you with your bad credit car financing when you go to buy a new or 'new to you' car!
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