With the prices of vehicles so high, trying to buy a car when you have bad credit makes things difficult. Car loans for bad credit, while they are secured loans, have become harder to find, as all types of credit has tightened up for lenders with less than perfect credit scores. So what do you do if you need a car?
Anyone with truly bad credit, in the 500′s or so, will definitely have a tough time finding a lender willing to lend. Even though the lender can repossess the car, they certain don’t want to have to do that if they don’t have to! And for people with scores under 700, it is still difficult, as most car dealerships won’t be able to offer financing for these borrowers. As for leasing a car, you can pretty much forget about that too.
There are some lenders out there though who are making bad credit car loans, helping people get a car with bad credit even though costs may be high. Unfortunately, the only way to make a bad credit car loan work for bad credit lenders is to charge high fees and interest, so that the lender is covered in the case of the default of a certain percent of loans. Before signing up it pays to shop around and find car loans for bad credit borrowers that have the lowest fees possible. You also should check to make sure there are no prepayment penalties, in the event you want to pay off the car early when you sell it.
Beware of letters you get in the mail that announce you’ve been “preapproved” to come in a buy any car on the lot for $20,000 or whatever amount they are trying to reel you in with. These loans have hundreds of dollars of hidden fees and costs, high interest rates, and they are limited to certain dealerships where the price of the car will also have significant fees added on. If you can resist the siren call for a new car, or something to feed your ego, then think of feeding your bank account instead, and save your money. Buy something that works, not something you can’t afford.
The best idea though would be to void borrowing if you can. Find a reliable car that runs, and buy it for cash. Once you purchase the car, try to put monthly “payments” into a bank account, just as though you have a loan to pay each month. Before you know it you will have d cent balance socked away in the event your cash car needs to be replaced. Or, you will have a good sized down payment for another car when you do qualify for a loan again.
Still, we can’t stress enough how much better it is to keep paying cash, even if it means you aren’t driving the car of your dreams – without a high cost car loan for bad credit hanging over your head, you’ll sleep much better at night.