Getting a car is an exciting thing. A vehicle can help you get around easier, not only for simple tasks like getting groceries, but also if you hold a job that requires a long commute. Of course, buying a car isn’t as simple as going to the dealership and picking one up. There are many things that you should do before you can actually even consider choosing which car to buy—like ensuring that your finances are in order.
As with everything else in your life, having bad credit can affect your chances of getting a car loan. With that said, it’s not impossible to get approved thanks to certain financial institutions that offer car loans for those who have poor credit. In fact, many major banks will offer consumers old and new loans with variable and fixed rates, as well as flexible repayment schedules. If you’ve filed for bankruptcy before, though, most lenders are unwilling to approve of such applications.
In addition to looking into your credit report to see what kind of loan and which institution you should go for the loan, be weary of bad credit car loans. These loans are subprime or near-prime vehicle loans that carry a very high interest rate. Loan terms will vary depending on the lender, though terms are usually 36 to 72 months. Monthly payments may also vary, depending on term, APR, and other such factors. Finally, most financial institutions will require applicants to be employed.
You should also be familiar with the two main types of loans—secured and unsecured—and the differences between them.
Secured credit car loans
Secured bad credit car loans require that you put up something for collateral—your car. These loans may be attractive to some individuals as they feature lower interest rates. They can be as low as 4%, but the rate depends on what your financial health is like. Most of these loans start at $20,000, with a fixed interest rate over the repayment term. If you have bad credit, you might be happy to know that there’s a 95-100% approval rate. Lenders may also not require a down payment, or require a lower down payment in comparison to unsecured bad credit car loans. Of course, if you are unable to repay the loan, this means that your vehicle will be repossessed.
Unsecured credit car loans
Unsecured bad credit car loans may cost you a bit more than their secured counterparts, but can be attractive to some as they do not require collateral (the vehicle cannot be repossessed because it has not been pledged as collateral). This, however, puts the lender at greater risk, which is why these will cost you more. If the borrower defaults, the lender will use a collection agency or sue for the balance owed.
There are many things to look out for as someone with poor credit who’s also looking for a car loan. For one, understand what your financial standing actually means. If it’s much below average, it’s possible that car dealerships will want to take advantage of that fact and offer things that will put you in further debt. Make sure you properly assess car prices and interest rates in the event that you are quoted something that’s beyond your financial capability. Finally, be sure to look over your credit report to ensure that everything is correct. Read more about how to read your credit report.
Ultimately, having a low credit score means that it is very likely that you will have to pay higher-than-average interest rates. With that said, there are still ways to save yourself some money when seeking out a car loan. For example, purchasing a new vehicle and avoiding the extra add-ons will be cheaper because dealerships often offer lower interest rates for newer models, and basic models are generally cheaper. A shorter loan term, however unintuitive, can also save you money because they generally come with lower interest rates.
Evidently, while having a low credit score can make it harder to get a car loan, it’s not impossible. If you’re looking to improve your credit score in order to be approved for a better car loan sooner, urLoan is here to help you get on a positive track to financial health. We offer flexible term loans that’s easy and hassle free that can help you rebuild your credit.
Learn more about how UrLoan can help you with your financial needs, and call us at 1-855-723-5626.
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