Do You Need a Bad Credit Auto Loan?
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Even with bad credit, financing can still be achievable.
Auto shoppers however sometimes fall into traps laid by dealers who know how to take advantage of them.
Why do people with bad credit fall prey to bad lenders?
- You become vulnerable to tricks pulled by dealers because you’re left with limited options.
- Other loan providers require a previous loan made.
- You’re not aware of your options because of your credit history.
- You want to focus on your monthly payment rather than the price of the vehicle.
Are you aware that people with a bad credit auto loan are usually the dealer’s most profitable customer?
This is because those with bad credit tend to be at the dealer’s mercy, and they entrust the financing to their dealers completely.
There are some dealers who sound too good to be true. They’re the ones who advertise their loans in ways such as:
“No credit? Not a problem!”
“Need financing? We can help you with that!”
“Credit history’s not an issue with us!”
These dealers are the nastiest to deal with. They specialize in subprime credit, or for people with bad credit. Auto loans processed by these dealers tend to be with higher rates and/or higher payments which is not to the joy of the borrower.
As previously mentioned, people with bruised credit just don’t check other options open to them. They don’t have the means to research their options and compare all the opportunities available to them. All they do is to go to the dealership and hope that they be given a car. Any car could work, in fact!
Do you now see why dealers love this kind of customer? Not only could they milk profits out of this customer, but they also can make the customer feel as if they’re doing him or her a favor.
What should you expect to hear from dealers if you have bad credit?
- Loans applied for will have higher interest rates than usual.
- They might lie about your credit report and credit score.
- They might require you to purchase additional items such as credit life insurance, extended warranty, etc.
- Since they think you’re desperate, they might use common scams.
Dealers sometimes tend to use ‘psychological tricks’ to make the customers think they ‘own’ the car. They allow the customers to drive the car as much as they want. They’ll even tell their customers how good they look while driving the car, and everybody will be thrilled to see them inside the car.
By the time they’re done, the customer will do almost everything to have the car – he’ll accept terms regardless of how high the interest rates or payments will be, as long as he’ll get to take the car home with him.
The dealer, on the other hand, will arrange the terms and financing. With that being said, every profit will be maximized. Interest rates will be jacked, loan terms be stretched, and add all the other products that can be included in the loan.
Have you heard that there are some dealers who have made a profit of around $10,000 on just a single customer? It’s just sad to hear that there are some who are taking advantage of those who have terrible credit. A bad credit auto loan given to them is not that competitive compared to what is given to those with the usual rates.
What should be done by those people who have bad credit?
- Car Financing should not focus on a specific vehicle as you might end up with limited choices.
- Don’t go for those loans with terms of 72 or 84 months; you might end up paying for too much interest.
- There are a lot of financial institutions who can give you good rates; you don’t have to resort to lenders who’ll guzzle up all the money out of you.
- Have a copy of your credit report and score to know where you stand so dealers can’t lie to you regarding loans.
It’s not worth it to deal with vultures. If you can, wait and save enough to buy a car in cash and build your credit in the meantime. Or get a loan and use it to rebuild your credit.
Prior to visiting the dealership, be informed and educated. Understand your current credit history standing to know how much interest rates could be applied to you. Check the credit scores and credit report online with the credit bureaus.
If you have bad credit, auto loans that you apply for will not have 0% financing. Yet you can still go for acceptable and tolerable loans. It’s a mistake to apply for financing without the knowledge of your credit score. By doing so, you’ll be even ground with dealers, and you can verify numbers and ensure your loans are not payment packed.
By raising your credit score, your chances of getting approved can drastically improve. Pay off your balances and take your time in cleaning up your credit history and have your score above 600 as much as possible. Once your situation gets approved, it’s best to save money to at least lower down your expenses.
Here are other additional tips for auto loans:
- Close other unused credit accounts; not doing so will drag down your credit score.
- Your monthly income should ideally be at least $1500 or greater, and should be stable for at least 6 months.
- Ensure your credit reports should not have erroneous previous addresses as well as other errors.
- Pay for other cards with higher APR prior to applying for auto loans.
- Credit card balances should be kept as low as possible.
Be smart regarding your credit while applying for auto loans. Credit reports, when pulled, can possibly create an inquiry on your file that may hurt your credit score.
Buying cars, whether new or used, can be quite harrowing. A lot of paperwork has to be processed, information has to be obtained, and there’s a lot at stake.
Want a car? You should not be stopped by ugly credit. Your loan should be able to be processed as long as you’re ready for it. Try our car loans calculator to see what you qualify for
Here at Guaranteed Auto Loans we can rebuild your credit even if you should happen to be in a situation where your score is horrible and even your mom won’t lend you money. Check out some of our testimonials from people who have been there.