If you have bad credit due to unemployment, illness or any other type of dramatic life change, you're probably thinking that you're out of luck when it comes to buying a used car. However, that is simply not the case. According to a recent report from Experian Automotive, more auto lenders are taking the plunge on offering loans to customers in the subprime risk tier, with those loans representing more than one in four new vehicle loans for the second quarter of 2012. Given these circumstances, now is perhaps the right time to look for an auto loan that not only fits your needs, but also your budget.
You Have Options
The last thing you should do is let a less-than-perfect credit history in the way of your chances of buying a solid vehicle. Keep in mind that while you might not be able to get the newest vehicle on the showroom floor for 0.9-percent APR, there are plenty of excellent options for you to utilize in order to get yourself behind the wheel of a decent vehicle.
- Work with the Loan Specialist. Depending on who you talk to, the loan specialist may be able to work with you on a case-by-case basis, especially if you've been making efforts towards restoring your credit history.
- Go With a Cosigner. Having your loan backed by a cosigner with an excellent credit history and stable income can increase your chances of obtaining a reasonable car loan.
- Save Your Money. The more money you are able to put down as a down payment, the smaller your overall monthly payments become.
- Buy Smart and Sensible. It may be easier to obtain a loan for an affordable compact or midsize sedan rather than something that is a bit more extravagant.
Many assume that it is impossible to identify car loans for people with bad credit. However, times have changed with more online lenders providing auto loans for bad credit. Why most people are not able to identify bad credit card loans is because they do not know where to look. Below is vital information that can assist you know where to identify bad credit auto loans.
Where not to look:
Many people are not able to identify bad credit auto loans simply because of using wrong search strategies. Many people start the process by going through their phone book and calling few firms. This strategy is not effective because a large percentage of lenders are not available in the local phone books but rather can easily be found online. Traditional lenders are very rigid and may not even want to consider issuing loans to people who have poor credit history due to the high risk factor.
Also these kinds of lenders are usually very expensive when it comes to interest loan rates. Even after getting a quotation, it is usually still exorbitant and unaffordable to many individuals. Further to this, the quotation is usually saddled with complex terms and conditions.
People also tend to approach dealerships directly in a bid to secure a car loan. It is fruitless to approach a dealer if you have poor credit scores. This is because they simply do not consider giving a loan to anyone with bad credit.
Where to look for Car Loans :
Those with bad credit should concentrate their efforts in dealing with lenders who issue such loans. There are online lenders that specialize on issuing bad credit car loans. The beauty about using online lenders is that they are flexible, provide attractive discounts and take time to make sure that the applicants get the best manageable loan deals possible.
With this information in mind, simply use the search engine and begin the process of looking for bad credit car loans.
When standard auto loans are denied, subprime car loans are sought instead. Subprime creditors lend their money to those without at least a "Fair" rating for a credit score. It may seem like a generous second chance, but often this second chance comes at a steep price. Here are two reasons why someone with a bad or poor FICO score may want to reconsider getting a subprime car loan.
Massive Interest Rates
Every time a subprime lender allows subprime car loans, they take a risk of the borrower defaulting on the loan. To make up for this risk, the lender spikes the loan's interest rates. It will be quite a frustrating experience paying for deliberately elevated interest rates, especially after knowing what the normal interest rate should be. A person with a bad credit history probably won't have a choice in this matter; it's either take the subprime car loan or go without a vehicle.
A Lurking Repo Man
Vehicle repossession is another risk in accepting subprime car loans. Subprime lenders won't hesitate to get the vehicle pulled from the owner's possession. Just one late payment could mean the difference between driving and using public transportation. Some subprime car loan lenders have gotten especially furtive about how they go about repossessing vehicles. For example, they may provide a free GPS device in the purchased car. This implanted device can and will be used to hunt down the vehicle for a speedy repossession.
In October 16th, 2011, this practice got out of hand and ended with a Jacksonville car dealer facing a lawsuit by Florida's attorney general. Having a car repossessed will leave a long-lasting smear on a person's credit rating. Additionally, the harsh interest rates may make a loan seeker think twice about subprime car loans. Even with these potential problems, however, both borrower and lender know that having to deal with subprime car loans is still better than walking. If you're thinking of getting a subprime car loan, please proceed with caution.
If your credit score has taken a dive recently, you'll no doubt feel the impact when you attempt to apply for car loans. Its understandable that the car loan might be necessary to procure a means of transportation, but there are some things you'll need to be aware of if you decide to go this route.
1) The interest rate on your car loan will be higher than usual.
If you have bad credit, the interest rate on your car loan could be anywhere from a few points to several points higher than the normal rates. Good interest rates are a means to reward customers who have done a good job maintaining their credit history. If you don't have a history that shows that you would be responsible for the loan, lenders could charge a higher rate to offset the risk of offering you the loan.
2) You'll need to make a sizable down payment.
Depending on the state of your credit score, you could be expected to make a down payment of 20% or more of the price. The reason for this comes back to the risk that the lender takes as accepting you as a customer. Should you default on the loan for some reason, they already have amount that you have given as a down payment, which will help lessen the possible loss on the loan. Being willing to make a larger down payment will also send a message to the lender that you quite serious about paying on the car loan, as you would obviously stand to lose that money if you default.
3) Your options may be limited.
Even with being willing to pay a higher interest rate and make a larger down payment, you may find that not all lenders are receptive to doing business with customers who have bad credit. If you need help finding a lender for a car loan with bad credit, websites such as carloans.com can be a great help. This type of company already has a network of lenders in place, including several that specialize in customers with bad credit or no credit. By using the network of carloans.com, you can save yourself lots of time in the process of completing the loan application.
The purpose of this article is not to discourage you from getting a car loan if you have bad credit, but to give you a realistic expectation of what the loan experience will be like if you need a car loan with bad credit. This can help you be mentally prepared for the process of getting a car loan with bad credit.