Where to Get Bad Credit Auto Financing?
Where to Get Bad Credit Auto Financing?

Where to Get Bad Credit Auto Financing?

It seems that it is getting harder by the day to get auto credit.

It is your first job and after a few days of riding the bus to work, you realize that a car will make your life ten times easier. Those long hours in the bus and train can seem exciting in the beginning but the novelty wears off after a few weeks.

It is not long before you find yourself at a car dealership looking for a car to help you go to work, or even take your children to school.

Trying to pick that perfect car seems exciting until the car dealer asks you how you are going to pay for it. Auto credit is the first thing you say. Only after they run an auto loan credit check on you do you find out that you cannot afford the car.

It seems that your only option is to find auto financing for people with bad credit.

The biggest problem with cars is that currently, we need them! How are you going to find auto financing with bad credit?

As luck would have it, your credit may be affected by:

1. You were late in paying a credit card,

2. You have never applied for credit before, or

3. Your finances show that you cannot afford the car.

Since you need the car, it seems that your best option is to get an auto loan for people with bad credit. The solution however may not be as great as it looks.

What a Poor Credit Auto Loans Mean to You

If you have a good credit score, it is easy to find credit union auto loans or a car loan from your bank at very low rates. Some credit unions can charge interest rates as low as 5% per annum. Compare this to an auto loan for bad credit, which may be as high as 25% per annum.

If we assume that you buy a $5000 car and you have a repayment period of 2 years, you will pay more for the poor credit auto loans. In this scenario, $219.36 for the credit union loan and $266.86 for the poor car credit loan.

It may not seem like much but it adds up over time. You will end up paying $1140 more for your car.

That notwithstanding, things are tougher for those with bad credit especially when you consider that:

1. You are likely to pay more insurance if you have bad credit,

2. Your period to repay the car loan will be shorter most of the time, and

3. If you have a bad credit car loan, you are likely to get higher interest rates when buying other products such as a mortgage and even credit cards.

Do not be surprised when the car dealer asks you to pay for your car loan every week. According to them, you are a poor credit risk and they would rather have you paying your car loan weekly. It is also sad but true that those with bad credit generally get cars that are of very poor quality. Expect more trips to your mechanic when you have poor credit auto loans.

In short, it does not pay to have bad credit when applying for a car loan.

Taking Advantage of Bad Credit Auto Finance

Even after going through all the negatives of auto loans for bad credit, the fact remains that you will not be able to go to work without that car.

Most of us have no option but to apply for the loan. Car dealers have come up with ingenious methods to make that happen. They have come up with packages named anywhere from auto loans for poor credit to no credit check auto loans.

Of course, the payment terms are very tough for most of us but you can still use them to your advantage. For example:

  • Use the credit auto financing to build your credit – When you pay your car loan on time, you consequently establish your credit. This should allow you to get better credit terms in the future.
  • You can always get a better rate on a better car after re-establishing your credit. – It does not take long to re-establish your credit and you can use this to re-negotiate your payment terms.
  • Though many financial gurus will claim that very bad credit auto loans are bad for you, the truth of the matter is they are an essential part of any personal finance plan. After all, without a no credit auto loan, where is a college student with no credit supposed to get his first car?

Your goal with an auto loan for bad credit should be to create a good credit profile over time. Consider the extra interest payments to be your fees for gaining better credit ratings and your car to be the bonus in the package.

Where to Get Bad Credit Auto Financing

Obviously, your first stop is your local car dealership. However, be very careful and ask for references from other clients who may have used them. Your friends, family and neighbors may have a good idea of a fair car dealer.

You should also check with your credit union. Credit unions have proven to give out better terms to their clients than most banks or bad credit auto financiers do. It is very likely that they will ask you to have a guarantor for the loan so it pays to be in good terms with your parents or friends.

If you have decided that your only option is an auto loan for people with bad credit, then the best thing to do is compare. A few minutes comparing your options can save you time, money and headaches in the future. Go online and do more comparison-shopping. The truth of the matter is that a bad credit car loan may not be as bad as you think.

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