One type of loans that hasn’t completely disappeared due to the economic downturn is car loans for people with bad credit. With auto financing for bad credit, the loan is a secured loan, it’s more likely that a lender will take a chance and approve a new or used auto loan. The major difference will be that auto loans with bad credit carry an interest rate and fees that are usually much higher than those for someone with good credit.

First, expect that if you have really bad credit, say in the 500s, it is not likely that anyone will lend you the money to buy a car, even although it’s a secured loan. There may be some lenders that will offer poor credit car finance in their advertising, probably a lender affiliated with a used car dealer, which loans would be at very high interest rates and with high penalties. Or you might find out when you get there that despite their ads, they really aren’t going to lend to you unless you buy a specific car they are trying to get rid of. So if your credit is very poor, you may want to just save as much cash as you can for a bigger down payment, or buy a low-priced car for cash, until you can rebuild your credit to some extent.

But if your score is in the low 600s, you can probably get auto financing for bad credit, but again, the terms will be high. For example, interest rates from 10% to 19% are not unusual. This can cause you to have continued trouble repaying debt, so think twice before you jump into such a loan. Will you be able to repay this loan? Will it make your debt situation worse? Try to borrow the least amount possible, and build up as much cash down payment as you can. There can also be high fees, such as application fees and so on, that will add a few hundred dollars to your loan.

Also, think twice about considering auto loans with bad credit from a car dealership. Many times, you’ll get something in the mail that looks like a check, saying you are pre-approved, but only if you shop at a specific dealership. You can expect that any car you buy will be overpriced, extra charges tacked on, plus a high interest rate.

Don’t make a financial mistake just because you want a car. If you really need a car, take steps to find car loans for people with bad credit, but make it smart financially based on your budget, what you can afford, and also whether the total car package is a good deal or not. It might be cheaper and less painful economically to just keep your old car running until you can repair your credit again.