Securing Auto Loans With Bad Credit: Finding The Best Deals

When buying a car, the loan that is used is not generally known to be a huge debt. But there is no denying that getting an auto loan with bad credit can be tricky. But there are options available, with traditional lenders, online lenders and independent finance companies all to choose from.

But even with bad credit scores hanging over your head, there are ways to secure approval with the best terms possible. It is a matter of being aware, not just of what repayments are affordable, but of the lender and his terms.

The good news is that there are ways to greatly enhance the chances of securing auto loan approval. From improving your credit scores to your choice of interest rate types, here are some factors that should be looked into before submitting an application.

Fixed or Floating Interest Rates
There can be little surprise that the type of interest rate chosen when seeking an auto loan with bad credit has a big say in how affordable the loan is. There is a choice of two: fixed rates and floating rates (otherwise known as variable).

Fixed rates are what the title suggests, fixed throughout the term of the loan. This means that the rate will never fluctuate and so makes budgeting a lot easier. When looking for loan approval with the best terms, this is often seen as the superior choice. However, the rate is always a little higher than a floating rate would be.
A floating rate changes with developments in the market place, so is very much affected by any economic crisis - such as those experienced in recent years. It means that repayments on the auto loan can change dramatically over the course of a few months. Alternatively, if the economy strengthens, the repayments may fall - but that is the gamble.

Avoid the Dealer Financing
It is normal practice for car dealership to offer financing options, but it is not always a wise move to accept this option. The reason comes down to costs, and how it can drastically affect the affordability of an auto loan with bad credit.

Basically, the dealers will offer a convenient facility, saving prospective customers the hassle of applying for a loan from a traditional lender. But they can offer a faster approval option. This sounds great, but where they fall down is that approval with the best terms is rarely the result.

Dealers tend to charge an extra 1% or 2% on the sum borrowed for the hassle of getting a contracted financing partner. This is on top of the interest charged by the financing company, so the cost of the auto loan is higher than it actually should be. The dealership pockets the extra expense.

Points to Help Secure Best Deal
There are some things to do that can greatly improve the terms of any loan agreement when seeking an auto loan with bad credit. The first is to set about improving your credit score. If that can be increase, then the interest charged is reduced and the loan becomes more affordable.

The second is to offer to make a down payment on the automobile. This can be as high as possible, but a 10% down payment is likely to cost only around $3,000. As a result, the size of the required loan is less, and approval with the best terms becomes much more likely.

Another option is to get a cosigner to commit to the auto loan. The cosigner promises to make the monthly repayments in the even the borrower is unable to, so the risk factor is practically removed. This then means the interest rate falls, and the cost of the loan too.

Joycelyn Crawford is an expert in Easy Loans for Bad Credit and Easy Home Loans. Visit her site at

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