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Get a Good Car Loan on Bad Credit
People with a great credit score are often trusted more and allowed to take larger sums of money with a smaller Annual Percentage Rate. Nonetheless, this doesn’t mean you’re forbidden from getting a car loan that won’t burn through your wallet if you have a sub-optimal credit score. A credit score one lender sees as “bad” and as a liability, may look like an acceptable or profitable score to another.
Excellently credited borrowers can get away with ridiculous interest rates of less than 5%, while those with worse credit sometimes pay upwards of 12% annually. Don’t worry, this doesn’t mean there aren’t still deals to be made. There are a few strategies you’ll want to employ if you want to get a good loan on bad credit.
The most important thing to realize is that your credit score might not be THAT bad. A score that would get you a difficult mortgage on real-estate might account for an all-right auto-loan simply because auto loans include smaller amounts of money over a drastically smaller time period.
It’s also important to visit multiple dealers and banks. Some of them may accept your credit score and make you an offer you can take. Going to your local banks and your credit union is a great place to start. Be wary though, if a lender offers you something that seems too good to be true it’s usually because it is.
Getting a friend to come along when looking around can also help somewhat. A second opinion is always a good thing, and you can even tell them to act unimpressed or critical of the loan you’re being offered.
The crucial thing to understand is that getting a long-term loan with promises of lesser monthly payments is usually a trap. Try for a loan with the lowest APR over the shortest time – the monthly payments may be a bit bigger but you won’t go bankrupt paying the loan back. Of course, if you’re sure you have a 100% stable source of income for the next 60 or so months and confident you’ll have sufficient monthly revenue, by all means go for the longer-term loan.
If you don’t have very good credit score, the goal would be to get the most out of your money, since you’re going to be paying it back at a higher interest rate. This means it’s especially important to read the fine print and look out for add-ons, extended warranties or insurance you don’t need, as they’ll only make your loan more difficult to repay. Car dealer tricks also include giving out great-looking contingent or conditional loans. Before driving away, make sure your loan terms are final, so you don’t get surprised a week later with the 20% increase on your down-payment.
As always, picking out the right loan is difficult but possible (even with a lousy credit score). Just make sure you do your research and don’t sign any suspiciously good offers. Shooting high is all-right, but you should know your credit limits.