Bad Credit Auto Financing

Bad Credit Auto Financing – Your Credit is Messed up but You’ve Got to Have a Car

Presented by Charles L Harmon

Have you ever found yourself in bad financial situation and unfortunately you need to get a car? Maybe yours broke down and you don’t think it’s worth it to try to fix it. Or you may have the situation I have with my old BMW 735iL where the cost to fix almost any serious problem (and maybe not so serious) is more that the car is worth.

How do you get a car when you have bad credit? Auto financing can be a challenge in these times of constricted credit. Lenders are not freely giving money. Even those with excellent credit can have a hard time getting financing for an automobile. But bad credit auto financing is available if you know how to go about it.

The first step in securing bad credit auto financing is to review your credit history. If you detect errors, get them corrected before you go for your car loan. You can order a credit report for free once a year. If there are inaccuracies, write a letter to the credit bureau explaining the discrepancies. They have 30 days to either confirm the fact or remove it from your credit report. You will be surprised at how much your credit score improves when you challenge inaccurate information.

The next step is to determine how much you want to pay for a car. This includes how much you can comfortably put down at the present time and the amount your budget can handle in terms of monthly payments. This will be the lender’s estimate of whether you can afford the monthly payments. You can use a car loan calculator to help you determine how much car you can afford.

The next step in securing bad credit auto financing is to prepare the documentation. This includes proof of employment and income. Remember that with a house, the value of the property doesn’t change when the new owner takes possession, but with a car, the value drops as soon you drive it off the lot. That is why the people giving car loans have to be so picky about who they finance. Also consider you may be paying a premium price for whatever model you might purchase if you are buying it from a dealer.

Finally, keep a clean credit history. Once you have secured bad credit auto financing, make sure that you pay your loan on time every month. This will help you get loans in the future. In fact if you can pay some extra on the interest so your total cost of the loan will be lower. That usually works with simple interest loans that allow paying extra toward principal.

Keep in mind that as a person with less than stellar credit, you will be expected to make a larger down payment and will be faced with higher interest rates. There is no getting around that. This means your monthly payments will either be higher per month or stretched out over a longer period of time.

You might be expected to put down up to 50 percent of the car’s price in order to secure the loan. The interest rates can be up to 26 percent. At that rate, on a $15,000 loan over 4 years you will pay more than $9000 in interest.

You should watch out for dealers who “specialize” in bad credit car loans. These dealers often have inflated prices on the cars and higher interest rates than you would be able to secure elsewhere.

Often people faced with bad credit auto financing situations are better off purchasing an inexpensive new car than they would be going to a used car dealer as new car dealers can secure factory financing.

The good news about bad credit auto financing is that if you make all of your payments on time, you will be building good credit for yourself. That means the next time you go for a car loan, you can get it at a more attractive rate. Not only will the rate be better, but it is always easier to get a car loan if the previous car loan had no payment problems, especially if it was a fairly recent loan.

Charles is working on his travel site.


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