Bad Credit Car Loans: 5 Things to Know
Here are a few things you should know about getting car finance with less than perfect credit. Higher Interest Rates–With bad credit you are a higher risk for the lender, but after a year or so of timely payments, you may qualify to refinance at a lower rate. Higher Down Payments–A lender uses the down payment as a guarantee for the loan. The bigger the down payment, the less likely you are to default and loose that investment. With bad credit you can expect to make a higher down payment. Car Selection–With bad credit you may be limited on the kind of car you get to purchase. Most dealerships will have a selection of cars specifically for those people with bad credit. These cars generally have higher mileage and cost less money. Longer Terms–The terms on bad credit car loans will generally be shorter than regular car loans.
It’s typical to see a bad credit car loan financed for 24 to 48 months. This may make your monthly payments higher. Second Chance Dealers–Often times you can find dealers that specialize in second chance, or bad credit car loans. These lots will generally finance the cars themselves. You will make your payments directly at the car lot.