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Bad credit borrowers are often faced with a dilemma when they go to purchase a car. While bad credit car loans are among the easier types of loans that those with bad credit can have access to, these same borrowers often rely on car dealerships to help them secure the funding they need to purchase a vehicle. This is an unfortunate mistake. Working with a car dealership in order to secure a bad credit car loan is like going through a middle man - which means one thing: paying more for the loan so that the car dealership can be compensated with kickbacks from lenders for your business.
Lower Monthly Payments, Less Interest Paid
Car dealerships often advertise with claims that they can finance anyone, regardless of their bad credit history. And usually they can. But the truth of the matter is that individuals can find these same loans, regardless of their credit history and without the assistance of a car dealership. By avoiding the car dealership financing from bad credit lenders, you can lower your monthly payment and interest charges, which will make your car cost less in the long run and allow you to pay for it more quickly. Car dealership bad credit loans can cost you as much as 5% more interest on the car loan and also may require a big down payment. Either way, the dealer will be making a nice fee from the lender for pointing you in the direction of the lender and for taking you application. Your goal is to keep that money in your own pocket.
Collateral Is The Car Being Purchased
With a bad credit car loan, the actual car, truck, or other vehicle that you are purchasing stands good for the loan and is considered the collateral for the loan. This makes it easier for lenders to approve bad credit borrowers because they will place a lien upon the car title that will only be removed after you have paid them in full. If you do not pay as agreed, the lender can always repossess the vehicle and sell it to be reimbursed.
Finding A Bad Credit Car Loan
Without the help of the dealer, finding a bad credit car loan just requires a bit of looking (and it does not hurt to know where to look either). Shopping around is important, because there are a huge number of lenders who are writing bad credit car loans right now. Most of these lenders are doing the bulk of their business online via the Internet. This is an even bigger plus for you because online lenders will offer the lowest rates possible for borrowers with your type of credit. And while it does help your application to have a down payment of some type, it is usually not required. Keep in mind, however, that having a down payment, even one that is as little as 10% of the purchase price for the car, will lower the amount that you need to finance, thus lowering your monthly payment and the amount of interest you will pay. With these types of lenders, you can be pre-qualified before you go shopping for your car, which makes it easier for you to bargain for the best deal. |
