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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.
Getting A Loan With A Bad Credit Rating
The good news for consumers with bad credit is that in today’s marketplace, there are more options for obtaining credit. While borrowers with excellent credit certainly have greater opportunity and access to higher loan amounts, favorable terms, and better rates for loans, borrowers with bad credit now have some hope to borrow money for specific needs.
Many lenders are putting together unique and specific loan products tailored to borrowers with bad credit. Typically, to get the best loan amount, terms and rates available, borrowers that have a bad credit history must secure loans. This means that they must put up their home, auto, or other valuable asset as collateral to reduce the risk to the lender of funding the loan. Homeowner loans are usually the most beneficial to bad credit borrowers if they have some equity in their homes and a valued property.
Obviously, it is much better to maintain good credit, but for many borrowers it is too late. Some lenders offer certain programs that are put together to give borrowers a chance to rebuild their credit while at the same time, gaining access to modest loan amounts. This helps the consumer borrow for specific needs and rebuild their credit for larger or more pressing future financing requirements.
With revolving debt and credit card balances on the rise, more and more consumers are finding themselves in situations with overwhelming and unmanageable debt. Some lenders also offer certain types of debt consolidation loans that allow borrowers to move balances from higher rate loans and cards to lower interest rate products. This is where second charges or homeowner secured loans are often used by borrowers with bad credit to obtain better rates than are available to them through unsecured loans.
The key for lenders is to effectively balance the risk to reward ratio of lending money. Lenders are obviously in the business of lending money so that is what they ultimately would like to do with any borrower. The borrower needs to offer support to their ability to repay debt or security to help offset the risk the lender perceives from the bad credit rating of the borrower. Consumers do need to be careful about overly aggressive creditors who seek to prey on desperate borrowers. Companies that approach consumers with offers that sound ‘too good to be true’, include up front fees, or hide unfavorable terms in fine print should be cautiously evaluated.