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Bad Credit Does Not Mean No Loan

Bad credit should not call a screeching halt to getting a car loan. Lending enterprises are out there that will approve a car loan even for those with no credit, poor credit, or even bankruptcies. Some car ads you see for auto loans for those with bad credit seem to promise a car no matter what the state of your credit reports. Believe it or not, many of those are grounded in the truth, but you need a guide to understanding your options and how these loans are engineered.

Process Is About the Same

You can get a car loan through direct financing and the process is much the same as for auto loans made to those with good credit. Of course, borrowers with bad credit may be asked to come up with a larger down payment and endure interest rates that are somewhat higher. Down payments can range form 20% to 50% and interest rates can range from 5% to 26%. Generally, auto loans for those with bad credit can have rates ranging between 7% to 18%. Two to four years is usually the range for amortization for auto loans for those with bad credit as opposed to 5-7 years for those with excellent credit. At least taking on such a loan does provide the opportunity for you to improve your credit standing.

Poor Players

It is generally believed that traditional and private lenders are the only options available when seeking a loan. Traditional lenders are difficult to get approval from when bad credit is a factor, while private lenders are also likely to turn down such applications. However, sub prime lenders specialize in home mortgage loans for those with bad credit, even very low credit.

For this reason, mortgages from sub prime lenders are a viable option for those who are under financial pressure, but need to raise funds to purchase their home. However, there are some compromises to make, not least over the fact that repaying a sub prime lender can actually be more expensive than some other online lending sources.

Still, there are some definite advantages to taking this option, with the likelihood of getting mortgage loans approved with bad credit far higher than with the alternatives. This alone can make the extra expense tolerable.

Sub Prime Lenders Explained

The difference between normal and sub prime lenders can be roughly explained by their respective willingness to take on the risk of granting home mortgage loans to applicants with low credit scores. For the most part, traditional lenders prefer not to approve these kinds of applicants because the chances of the borrower defaulting on the loan are much higher.

A sub prime lender is typically expert in bad credit management and specializes in offering loan deals to bad credit borrowers. They are, therefore, willing to accept the risk. The only catch is that mortgages with bad credit have much higher interest rates, making them amongst the more expensive mortgage options around.

So you’ve been to a couple regular old car dealerships, you’ve picked out a car or two and you’ve been told that you’re credit is a problem and you can’t get approved. Maybe you just know that you’ve got bad credit to begin with and your looking for bad credit car dealerships.

Don’t.

The truth is that there is a way that you can get approved for a bad credit car loan with no down payment, without high interest rates and without the hassle of bad credit car dealerships.

Dealers that focus their business on financing people with credit problems are in a whole different class of car lots. They aren’t easy to negotiate with, they typically price cars at retail or even above full retail price and you generally will end up with a car that has a lot of miles on it. The finance charges are outrageous and they depend on their customers to be people that are just happy to get approved.

When you’re desperate to get approved, the dealer is at an advantage. You have no negotiating power. The dealer knows this, which is why you can’t get a good deal on a car at bad credit car dealerships. You simply cannot and will not. Take it from someone with 20 years in the car business.