If you have bad credit and need a car loan, then you need to act wisely so that you can get the lowest possible interest rate for your loan. The good news is you can get a car loan even if your credit rating has blemishes but you need to know where to apply so that you don’t end up paying too high of interest rate. This article will discuss ways of getting a bad credit car loan at a favorable interest rate.
Although having bad credit does not prevent you from getting an auto loan; it does affect the interest rate charged on the loan. Many individuals that have unfavorable credit rating end up paying too high an interest rate on their auto loan. The most important rule is to deal with a lender that specializes in providing bad credit auto loans. Never, relay on the dealer to provide you financing as the dealer does not specialize in loans and financing. The dealers primary function is selling cars; and thus, you can find more favorable interest rate if you contact a bad credit loan specialist.
Another reason you should avoid the dealer’s financing is because the dealer also marks up your interest rate in the same way they mark up the price of the car. The dealer marks up the interest rate that he or she received from the lender so that the difference will become the dealer’s profit. Thus, it is logical that you receive a bad credit loan for your car with a much more favourable interest rate if you applied directly through the lender.
One way to lower the interest rate is to borrow money against some collateral such as the equity in your home. However, you need to ensure that you are able to financially meet the loan payments along with the cost required to maintain your vehicle. Do not choose this option if you are not certain that you will have sufficient funds to meet these payments.
Another option to secure funding and receive more favorable interest rate is by having a co-signer. Lenders feel more comfortable when there is another person with strong credit that is willing to guarantee that the loan payments will be made. It is important that you speak with your co-signer and ensure that you can meet all cost associated with your car’s up keeping and financing.
You may also choose to lower the interest rate by buying down your car interest rate. If you do have the money, it may be a good choice as you will lower your interest rate.
Other factors to keep in mind that affects your loan is having a regular income and having employment with the same employer for at least a year or more. Living at the same location for over a year or owning your home is another factor that can help.
Various credit unions and local banks may also be able to assist you with securing a car loan if you have an existing account with them. Speak with your bank representative to find out the various options available.
A great way of finding bad credit car loans is by searching online for bad credit car loan lenders or sites that specialize in matching you with an auto loan lender based on your credit.