What You Need to Know About Bad Credit Used Car Loans
If your credit has a few blemishes, you might worry about your ability to buy a quality used car. Lenders don’t want to give money to people who aren’t creditworthy, but you need that car to get to work. Fortunately, there are options for those who need bad credit used car loans. If you’re willing to be patient and shop around, you might even get a good deal.
You Might Qualify for Traditional Auto Loans
Too many people with bad credit think they’re stuck with lenders or dealers who specialize in bad credit used car loans. This isn’t necessarily the case. For instance, those with scores between 500 and 600 might qualify for a loan through a bank or credit union, especially if you already have a relationship with them. Try applying through these lenders before contacting a subprime lender.
You’ll Need a Down Payment
No matter where you get a loan, you’ll probably need a down payment. You might hear advertisements on the radio about buying a car with no money down, but these deals are typically for those who already have good credit. A good trade-in vehicle might count towards a down payment, but you should also have some money saved up.
You’ll Pay More
Unfortunately, those with bad credit have to pay higher interest rates on loans than those who have good credit. In some cases, this can mean as much as $100 a month more. If you want to reduce your monthly costs, look at cars in a more affordable price range. A slightly older car, for instance, can offer significant savings.
Your Preferred Car Might Not Qualify
Lenders have unique rules detailing what types of cars they’ll finance. You might be willing to take on an older car with high mileage, but the lender doesn’t see that as a good investment. When you talk to lenders, ask about any stipulations they might have on mileage or age of the car. That way, you won’t waste any time negotiating a deal on a car you won’t be able to finance.
You Need to Watch Out for Scams
Scam artists know that those looking for bad credit used car loans don’t always have a lot of options available. A common scam is the “yo-yo” scam, where the dealer and lender let you drive the car off the lot, only to tell you a few days later that the monthly payment is higher than you thought. As you sign the papers, make sure that the deal is final to avoid this mishap.
The good news is that bad credit used car loans aren’t all that hard to come by, since the lender can simply repossess the car if you default on your payments. However, the best thing for your future is to use your loan as a way to build up your credit. With consistent on-time payments, you’ll be in a much better position the next time you need to buy a car.