A low credit rating can happen to anyone. Your hours could have been reduced at work or unexpected medical bills caused you to fall behind on your payments. You need a vehicle to get back and forth to work, but you are afraid that you will not qualify for a loan due to your credit. Being unable to work means you cannot pay your bills, so you are in a vicious cycle. The good news is that a used car loan for bad credit may be available.
Where to Find A Used Car Loan for Bad Credit
Finance companies, credit unions and banks all offer used car loans. It is important to understand that every lender has different criteria when determining whether to lend money. Although your credit score may be considered, it is not the only factor they use to determine whether you are credit worthy for a used car loan. Your credit score is often more of a factor for larger loans, like mortgages, as those type of loans place the lender at more risk.
One thing to remember is that your credit rating will have an impact on the interest rate on a used car loan for bad credit. Although the rate is usually a fixed-rate for a vehicle, it can be significantly higher for a person with poor credit than it is for someone with good credit. In addition, the lender may require a higher down payment as they may only finance a certain percentage of the vehicle sale price.
Foreclosures and Bankruptcy
If your poor credit includes foreclosure or bankruptcy, you may have more difficulty than those who simply have consumer proposals, maxed out credit cards, collections or missed payments. This does not mean you will not qualify for a used car loan for bad credit, as there are many companies that understand that bad credit should not define you for the rest of your life. One of the best things about car loans for bad credit is that paying the loan regularly and on time can help you improve your credit score.
Typical Car Loans for Bad Credit
Most car loans for bad credit are subprime or near-prime loans with interest rates that are higher than those offered to consumers with good credit. The terms are usually between 36 and 72 months while some will offer terms of up to eight years. It is important to remember that the longer the term, the lower the monthly payments. However, you will pay much more in interest over the life of the loan. You must be employed and earning a regular salary in order to qualify for a bad credit car loan.
Steps to Getting a Car Loan with Bad Credit
The first step is to be sure that the finance company is established and reputable. Most will want to make a copy of your photo identification and a recent pay stub. Some may require you to provide the name and address of personal references as well as copies of utility bills as proof of residence. In most cases, the company will notify you of your approval in one or two days, although some may be able to provide instant approval.
Although maintaining a good credit score is important for your financial health, financial difficulties can happen to anyone. If you are in need of a vehicle, contact us today to learn whether you qualify for a used car loan for bad credit. We want to help you get into a better vehicle, keep your job and provide you with the opportunity to improve your credit.