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Your Guide to Bad Credit Car Loan Financing
If you plan to get a car loan yet apprehensive because of your personal credit standing, a bad credit car loan is just what you need. Although consumers with a high credit score can get approved by any lending company, consumers who have bad credit history may find it a big challenge.
However, do not let your credit score set you back from acquiring a car loan with a good deal. Although bad credit car loans have higher interest rates than car loans for good credit, you still deserve to be treated with dignity and fairness. Do not predatory lenders take advantage of you just because you have poor credit rating. Below is a short guide on how to find the right bad credit car loan:
Explore your options. You can research online for potential car loan lenders. Many lending companies offer free pricing quotes from their websites so you can compare different bad credit car loan deals. You can use these quotes to do comparisons before making a final decision.
Check out car dealers. You can find car dealers that offer car loan financing, especially for consumers who are credit challenged. Dealers often use this strategy to increase their sales or to reach their sales quota for a certain time period.
Although you can try to get financed by a car loan dealer, you need to make sure that you will be dealing with a legitimate company. Some dealers may try to take advantage of a consumers poor credit standing by imposing high interest rates and fees. Before signing up for a deal, compare several potential dealers to find the best offer.
Check your personal credit report. Even though you are aware that you are credit challenged, its important to know exactly where you stand. Why, you may ask? Some lenders or car dealers may lead you to believe that you have a lower rating or that you cannot qualify for a lower interest rate because of your credit score.
Even with imperfect credit score, remember that you should always try to negotiate for a more affordable deal. Order a copy of your credit file from each of the three credit bureaus and bring a copy with you when meeting with a potential car loan lender or dealer. This way, no one can tell you differently about your personal credit rating.
Use the loan to rebuild your credit. While this may not be the best time to apply for a car loan because of your credit, you can make the most out of the situation by using your bad credit car loan to improve your credit score. This can be achieved by being timely with your payments from the beginning until the completion of your loans term.
Aside from your car loan, make sure that you maintain a good record or impressive payment history with other creditors. After six months or so, check your credit report to see your progress. Through consistent payment, you can surely improve your credit one payment at a time.
Car Loan After Bankruptcy
A car loan after bankruptcy can be one of two things. It can be a great experience as part of a plan to help you rebuild your credit and get you back to a better financial standing, or it can be a giant problem and a way into more high interest debt. Even if you’re in a situation where you’re desperate for a vehicle, you can still try and make your experience become the first one.
Bankruptcy is supposed to be a new start. Sadly for many people after things are finalized they are left not knowing what to do next, and still in a nasty financial situation.
Before you start looking to get a car loan after bankruptcy I recommend building up your credit a bit if possible. There are two types of credit you’re going to want to have, installment and revolving. Installment payments are for things like loans, where as revolving is for things like credit cards.
Obviously in your situation getting a traditional unsecured credit card can be difficult. You do have the option, however, to get a secured credit card. You can usually find these at your current bank or credit union. You deposit a few hundred dollars into a savings account which will be used as security to secure your credit limit on your new card. After approximately a year you will be able to apply for an unsecured card. Make sure that the company you work with reports to the three major credit bureaus about your on time monthly payments so that you build positive credit history.
It is recommended that you wait six months to get a car loan after bankruptcy, not just to build up your credit a bit, but because most lenders won’t work with you before then, and the ones who will, will offer you an even higher interest rate than you’d be offered if you wait a while.
Even after six months to a year you will still be offered very high rates. This is because you are seen as a risky customer. You can try to offset this risk by offering your home, another vehicle, or high priced collectibles as collateral and you will have an easier time both finding a lender and getting a better interest rate. You can also make things easier by finding a cosigner if collateral isn’t an option for you, but you should be aware that if you fail to make your payments this person will be held responsible.
These high rates are generally considered worth the cost, not just because you need a vehicle, but because by paying these rates now and making your payments on time every month you build up a positive credit history and will be offered better rates in the future and generally have an easier time of things financially.
By being responsible and in control of your finances a car loan after bankruptcy can be part of a plan to get yourself back on track.