You may be thinking that a bad credit is already a death sentence for a possible car loan or any loan for that matter. Having a previous unpaid debt, or bad payment habits may set you off to sign up for more loans in the future. Although this is true to some extent, there are actually a lot of options you can open yourself to, even with a bad credit.
The truth about bad credit and loans
In fact, there are several possibilities in having a car loan despite a bad credit. The only challenge you must face is the higher interest rates. If you have a payment plan in mind and can deal with the steep interest, then why not?
Having a car is definitely a necessity if you are using it for your business or work. Do not let a bad credit score stop you from having a loan. Given these facts, here are 5 things you should know if you are planning to buy a car with a bad credit score.
5 Loan Facts for Bad Credit Car Buyers
1. There are what they call bad credit loans
There is actually a way for you to secure a car loan, and this is what they call bad credit loans. One type of bad credit loan is the subprime loans. This is a varying type of mortgage which serves people with poor financial history. This type of loan would usually have a higher rate than regular car financing, although most of them are competitive in price ranges, so you have a lot of options.
You can also increase your chances of having a better loan by trying to make up through other means. This can include raising some funds to have a higher downpayment. This will make you less vulnerable to bad lenders and will increase your chances of acquiring loans with deals which are in favor of you.
2. Hard money loans are also a good option
Hard money loans are another way to get financing for your car. In this process, a borrower can get money by an assessor giving the equivalent value of a presented real estate. A lot of loan applicants who do not pass in the traditional financing process, or those who are pressed for time to borrow money, under bankruptcy or foreclosure, maybe all eligible for this type of loan. For this option, an individual must make sure that a payment plan is fully set, or else one can have the risk of losing the real estate property presented.
3. Most of these loans have high approval rates
Since these loans are catered to people who have bad credit, there is usually a higher chance of getting approved. There is lesser requirement needed, as long as you agree with the contract and be able to deliver these costs with due diligence. It is important to read the fine print of your loan contract very carefully, as to avoid being taken advantage of. Usually, shady companies would take advantage of people who are desperate to secure a car loan. Do your research about the company you’re applying the loan to, and be certain about their reputation. Online reviews and personal, unbiased testimonials can also help you get some insight.
4. Be aware of higher interest for these type of loans
A factor that makes these types of loans easy to acquire is their high-interest rates. People with bad credit do not make the cut usual financing means, therefore a lot of them may be willing to do agree on high rates. Just be aware that as you sign up to borrow money from these loan companies, you have to pay off the money borrowed, with added interest. These interests can be as much as 15% with for a 60-month financing on a car purchase. As a person with bad credit, just be aware of these facts and make sure that you have a strategy to pay off these loans on a regular basis.
5. You must learn to find a good dealer
Some dealers who have seen your credit score may also take advantage of your situation. They would require you to have unnecessary add-ons, financing methods, or any other extra charges in your dealership which may add to your already-steep financing deal. To avoid this, make sure to find an honest dealer who is willing to work with you. If something sounds fishy, don’t buy it. Trust your instincts, ask questions, and keep on researching.
A bad credit score doesn’t mean that you won’t get a car loan. It is possible if you’re able to do the right decisions. Just know that that there are risks to getting a loan with a bad credit, but you can lessen these risks by finding an honest company who can help you out.