Bad credit auto loans are a reality. Yes, it is true. You can get that money from a lender to buy your automobile, even if you have a poor credit score. Most lending companies won’t give you that loan if you have a poor score, or the terms would be so tough that it is better not to accept the loan. However there is a way in which you can get that cash advance even with poor credit. Here, we are going to find out how this is possible. Keep reading.
During the earlier periods, a person opting for an auto loan had to wait unwearyingly for the lender to check his or her credit rating. A bad credit report invariably resulted in refusal by the lending company or auto the loan provider. But the scenario has undergone a sea change now. You should know about this if you are thinking of buying an automobile. Yes, there are many companies who do this even today, but there are exceptions too. The lending companies that had once closed their doors are now standing on their toes to get your auto loan approved, irrespective of your having no credit, bad credit or bankruptcy.
Bad credit auto loans are finding their ways in today’s car market through the following three channels.
- There are dealers who hike the price of a vehicle, ask for heavier down payment and charge a higher interest rate for the balance money. For instance, a dealer may charge $5,500 for a vehicle that has a set price of $3000. The risk here is limited to a much lesser amount when the face value of the vehicle is taken into consideration. This is further reduced when the lender demands a higher down payment and gets paid. Thereafter the profit from this transaction can be very high as the charges on the interest rate for the balance money is very high.
- Bad credit auto loans are also issued when a sale is established through direct financing. The process here is almost the same as that of a good credit auto loan. However in this case, the borrower has to make a larger down payment, and also must be prepared to pay a higher rate of interest. In this way also, the investor’s risk is more than covered. You are happy too because you have the money to buy the vehicle through these bad credit auto loans.
- Sometimes there is a sales drive organized by the car manufacturer and the dealer is desperate to make a sale here. Dealers operating in such situation will often reduce their commission to a great extent, thus selling a vehicle at a much lower price. However, the dealer more than compensates this risk by asking for a higher down payment. This payment may cover 50% of the reduced sale price. But the dealer will still make a profit by charging a higher interest rate.
Bad credit auto loans can certainly help you if you have less than perfect credit score – but you must be careful about the deal you have.
