Bad Credit Car Loans
Bad credit will result in higher interest rate or in most cases an outright denial of credit when applying for a car loan, however there are options. Bad credit is usually a sign of getting behind or not paying your debts, so larger banks will not take on the risks however there are some auto loan companies willing to take the risk but will have higher interest to offset the risks. There are a few options that can help with getting a loan and potentially lower the interest:
- Large Down Payment
- Personal Loan
- Buy Here Pay Here
- Collateral Loan
Large Down Payment
A larger down payment will reduce the size of the loan which can help reduce the interest.
If you can get a personal loan from your bank, you can usually get better interest rates as they can see more details regarding your financial security.
Buy Here Pay Here
A buy here pay here loan is a loan from the dealership you are buying the car from. The rates can fluctuate depending on dealership however, the payments are usually smaller but weekly and they have more flexibility as they are the loan company and the seller of the car.
These are loans where you offer some sort of asset as collateral for a loan. This could be equity in your home, title in your current car, stocks or investments, or a secured banking account.
The car you are looking to buy can also affect the interest rate as well. Cars that have lower resell value will sometimes get the car loan denied as the loan companies is taking on a bigger risk. It is hard to pinpoint which cars will lose their value as there are many factors that can affect value such as mileage, color, condition, however other things like supply and demand market are harder to determine. If gas prices drop, the demand for trucks and SUVs rises and vice versa if gas prices skyrocket.
The best option would be to rebuild your credit before getting a loan, however sometimes this isn’t an option. Use a tool like credit karma to get an idea of your credit score and use the tips they offer to rebuild your credit. Even if you have bad credit you can usually get a secured credit card to help build your credit, even if you get denied for traditional credit cards. If your credit score is just shy of a threshold such as fair to good, it may be better to wait a month as the savings in the interest rate could save you money.