What To Expect When Taking Out Bad Credit Car Loans

As many as 25% of American adults can’t qualify for a regular car loan. That means that those of you who struggle with bad credit aren’t alone and it also means that there are a lot of options for you. However, these loans aren’t like regular loans. Auto loans for bad credit are structured differently to protect the people that are actually lending the money.

For example, 100% financing isn’t going to be an option if you have bad credit. In most cases, you will be expected to come up with a down payment for at least 20% of the value of the car. This protects that bank/lender and provides them with an easy out if you default on your loan.

Another aspect of using a car loan with bad credit is that the interest rate won’t be the same. Right now people with prime credit can get car loans at around 7% interest. You should expect to pay a lot more if you’re going to use a bad credit loan. Most of the time you’ll be paying between 10-15%, depending on your credit and how much you’re willing to put down on the loan.

Additionally, you can expect a shorter term on your loan. Prime borrowers can generally do five to seven year loans and those with bad credit will generally only be able to do three year loans. This means that you can expect higher payments but will also finish the term of the loan more quickly. Of course, if you have prime credit you can naturally opt for a three year loan.

What To Watch Out For With Bad Credit Car Loans

There are a lot of shady techniques that bad credit car dealers will try to use to get your money. The biggest tactic they’ll use is that they sometimes inflate the price of the car. You can save yourself a lot of expense by researching the value of the vehicle on your own. Kelley Blue Book is an online resource that you can use for free to find the estimated value of a vehicle. This can protect you from overpaying a shady dealer.

You should also be careful with the financing aspect of this business. You shouldn’t be paying 25% interest for bad credit used car loans no matter what you’re credit looks like. Between raising the price of the vehicle and charging ridiculous interest rates, some dealers are able to get thousands of extra dollars out of your pocket.

It might not seem like it, but you actually have more options than you think, even if you have bad credit. There are plenty of online lenders that specialize in this type of lending, you simply have to take the time to find them.