Bad Credit Auto Loans – The Good, The Bad & The Ugly

If you need a new car or truck, you probably want to get something reliable. If you do not have a lot of cash lying around, this means spending money that you are going to have to borrow from someone. Financing is the most common way that people get cars and trucks, but not everyone has good enough credit to get the financing that they need. There are some bad credit auto loans out there, but be sure you understand what you are getting into so you can find the best deal for your financial situation.

One thing to understand about bad credit auto loans is that you generally pay a much higher interest rate than you would if you have passable or good credit. The reason for this is that you have a past of not paying debts in a timely manner, for whatever reason, and someone who is going to give you money for your car loan knows this. They are worried that you may not want to pay this one back either, so they need to make more money off of a risk. That is why the interest rate is much higher. You have to factor this in to the total cost of your loan.

Not every institution out there will hand out bad credit auto loans. In fact, you may have a hard time finding a bank that will do this for you. Instead, you may have to find an auto dealership that specializes in finding loans for those with less than perfect credit. There are independent dealers that make these loans on their own, and some have access to banks that are willing to make these risky loans because they can earn more from it. Most areas have at least one dealership that offers such a program, so ask around.

If you secure a loan, there are a few things to consider that may be different than a traditional loan through your personal bank. Other than the higher interest rate on bad credit auto loans, the penalties for large payments may be very stiff. Some can tack on as much as fifty dollars or more if you are even one day late with your payment. Loans like this have a way of going out of control very quickly and you could end up in default very quickly without the means to catch up on the loan in a realistic manner.

You are also in danger of losing your car to repossession much more quickly if you get bad credit auto loans. You will not have as much time to make up a missed payment as you would otherwise. It may sound like these are hard to deal with as they are, but they can help those that have the money, but simply don’t have the credit. Just make sure you are more than able to pay back the debt so you don’t run into trouble and accept you are paying more than you should have to otherwise. It can also be a way to rebuild credit too, so keep that in mind.