The market for bad credit car loans is crowded and competitive, just like the market for bad credit home loans. If you need a car loan but have bad credit, be careful about who you choose to give you the loan. Even though most bad credit car loan lenders are honest, there are some who break the law by giving out loans that are too good to be true. The best way to deal with these dishonest loan agents is to know about them. Know more about your credit than the people who are lending you money. Get your credit report and FICO score from the last few months. If a lender says he knows more about your credit than you do, ask him where he got his information. Whenever possible, do business with a bank with which you already have a relationship. You can apply for "second chance" programmes with the help of many banks and credit unions. They know that by helping their customers in the short term, they will keep their business in the long term.
Be careful about who you apply with. You should be very careful about responding to any requests from bad credit lenders, no matter how you hear about them. Don't give a lender any sensitive information about yourself until you've checked out the company with the Better Business Bureau. The best thing to do is to reach out to a lender yourself. You can do this by using the Better Business Bureau and personal references to make a list of potential lenders. Don't feel bad that you need to ask about a bad credit auto loan. Many lenders make more money off of people with bad credit than from people with better credit.
Find out what the interest rates are right now. Interest rates change every day, so you should check them often. Depending on how good or bad your credit is, you could pay anywhere from 2 percent more than the average rate to 17 percent more than the average rate. Rates higher than this are often against the law. Watch out for lenders who charge the legal rates but add on a bunch of fees and penalties for paying off the loan early.
Find out how much your car will cost. Once you have chosen a few models, find out how much each one costs. A car financed with a bad credit loan might cost a little more than the same car financed with a good credit loan, but the difference shouldn't be more than a few hundred dollars, not a few thousand. You can get stuck in a loan if the dealer raises the price so much that the car costs more to finance than it is worth. Just like you will shop around for a car, you should shop around for a lender and let all of them know you are talking to more than one. If you think a lender can do better, tell them why and ask for different terms.
Any reputable lender will put their offers in writing and fill in all the blanks. Also, you should always have plenty of time to read all the loan papers. If a lender tries to get you to sign something you haven't had time to read, you should walk away. Because you have bad credit and need an auto loan, you will have to give up some things. Being taken advantage of by a predatory lender is not one of these trade-offs. A bad credit auto loan should be a way to rebuild your credit, not a trap that could cause you to have more credit problems.
