When buying a car, having a bad credit history and low credit score often creates problems. Lending institutions are wary of giving car loans to those with poor credit score. Bad credit has become a bane to the society these days. It is a fact that to get an auto loan with favorable terms and condition you need to have a good credit score. However, if you have a poor credit score, it would be an opportunity to improve your credit ratings before you apply for a loan. Else be ready to pay high rate of interest and a huge down payment.
Car Loans for People with Bad Credit
In reality if you have a bad financial past, it may be difficult to get approval for a car loan. But that does not mean that you cannot avail of auto loans. If you have a stable income and you are on the path of improving your credit score, then the best available option is to apply for bad credit car loans.
For this you will need to speak with a reputed car agent. This will give you an idea about the various options available. When you go to meet your car dealer, remember to carry your financial documents such as bank statements, pay slips, etc. which would give the dealer a clear idea of your financial situation, and the amount you would be able to pay each month.
Now you need to understand that the interest rates of poor credit score car loan are bound to be high. But it is worth pointing out that as your credit scores improve due to regular repayments of your previous loans and the current loans, you can apply for refinancing your car loans. Here you need to pay only a lower rate of interest.
When you are applying for a poor credit score car loan, you would have to pay a huge amount in terms of down payment, because then the lender will not lose much amount if you default on your repayments. Not only that the repayment term is shorter for a person with very bad credit score, and this period ranges from 24 to 48 months.
Loan Options Available for People with Bad Credit
If you have a bad credit history and still want to opt for car loans with longer payment durations, moderate interest rate and lesser down payment, then you need get a co-signer or a guarantor to sign the financial document. When there is a co-signee with a good credit, you are giving the bank a guarantee that their money is not lost and at the same time it gives you an opportunity to improve your credit ratings. The co-signee can be your spouse or parents.
Another option is to apply for a secured loan. Here you would have to provide collateral as a security.
There are several options for car loans with bad credit, but you need to remember to make payments on time to avail the benefits at a later stage. Read the terms and conditions before you sign on the dotted line.
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