For most people, owning a car is a necessity of life. The demands of work and family impose obligations that can only be met by having ready access to transportation. But what happens when you find your request for bad credit auto loans financing rejected?
Bad credit can happen to good people. You’ve missed work, been late with some payments, and your credit rating plummets. You’ve helped a friend by co-signing for them, and they’ve reneged. A bad credit score doesn’t necessarily mean that you’re a dishonest or irresponsible citizen, but it does mean that you’ll need to get creative when it comes to financing an auto loan.
Credit Rating Determines Your Auto Loan You
There are actually several factors that determine an auto loan’s terms. The value of your trade-in brings the price of the loan down, since you don’t need to borrow as much to buy the car you want. The kind of car you’re purchasing makes a difference too: an older car with low mileage is probably going to be easier to finance. Credit rating is the factor that makes the greatest difference in the terms of a loan, however. If a customer has an excellent credit rating, the implication is that he or she is going to comply with the terms of the loan and pay it off in a timely manner, allowing the lender to collect the interest with the least amount of effort. This is the kind of customer who will get the best terms on an auto loan.
How Bad Credit Auto Loans Work
This doesn’t mean that bad credit auto loans are impossible to find, however. There are companies that specialize in such loans, and that do so with honesty and integrity. In order for them to deal with the risk of lending to customers with bad credit ratings, however, they are probably going to make certain demands upon potential loan recipients. For example, they will ask that you be a resident of Canada and be able to provide proof of your residency. (This requirement often entails providing a working phone number and a recently paid utility bill.) You’ll need to be able to qualify for auto insurance. Most providers of bad credit auto loans will insist that you be employed full time (a minimum monthly income of $1500 is often expected), or that you have a guaranteed fixed income. Bad credit auto loan agencies may also require that you purchase your new car through an approved dealership.
Avoid Bad Credit Auto Loan Scammers
If you’re dealing with bad credit auto loan agencies online, by all means check their service record. Be sure that they are operating in the mainstream of the industry. You can expect that an honest lender will ask for a relatively high interest rate for a bad credit loan. But the dishonest lender’s loan has other tell-tale features to watch out for. If, for example, the loan agreement stipulates that the car can be repossessed in the event that only one or two payments be missed, or if the interest rates go up steeply after the first few payments, you are well off looking elsewhere for an auto loan. Be wary too of lenders who try to tack on extended warranties and other unnecessary add-ons to the car you’re looking to purchase.
Don’t Give Up on Your Credit Rating
Even if a low rating has made a bad credit auto loan necessary, don’t despair. Credit ratings can be improved, often within just a matter of months, with a little bit of application. Pay all of your bills on time. If you can manage it, pay off your new auto loan as quickly as you can. Bad credit doesn’t have to be a life sentence.