subject: Things You Need To Know Before Applying For A Bad Credit Car Loan [print this page] Bad credit car loans have really given lots of people the chance of owning their dream cars even if they have poor to bad credit score. Another good thing about this type of loan is that you can apply online and get approval instantly.
Before signing up for a car loan with bad credit, here are some things that you should know before making a decision:
Get to know the different types of lenders. When looking for the right loan company to deal with, it is very important that you know the types of lenders.
- Lender No. 1: There are direct lenders or representatives that work directly for a particular lending company. Since this person is a direct employee or representative, you can be certain that you will be charged the exact amount of rates and fees the company charges its borrower.
- Lender No. 2: There are lenders who will just finance you through a dealership which means that you will be charged a higher interest rate. Usually, they will offer you different bad credit car loans from various auto financing companies. Make sure to compare your options and choose the best offer. It is also recommended that you do your own research to make sure that you are not charged with unreasonable.
Secured Loans Or Unsecured Loans? Just like other loans, auto loans for bad credit also has two (2) types 'secured and unsecured. A secured bad credit car loan requires the borrower to submit a property as collateral. It can be a home, land or anything valuable. You can also use the car you are about to purchase as collateral. The lender has the right to repossess the car in the event that the borrower fails to submit his/her monthly obligations (depending on the contract signed by the two parties).
However, lots of companies are offering unsecured loans with instant approval. The interest rates are expected to be higher but if you shop around, you can surely have other options. Compare all your possible options and choose the one that offers lower interest rates and fees.
Bankruptcy Issues. People who have a history of bankruptcy are also entitled to apply for a bad credit car loan. However, you must know the right time to apply for a car loan with bad credit.
If you have been discharged recently, it is possible that you can get instant approval as well, but the rates will be higher. On the other hand, if you wait after two (2) years, there will be more lenders willing to approve your application and give you more competitive rates.
Limit your applications. Some people make the mistake of submitting applications to every loan company they encounter. It is best to weigh your options and decide which bad credit car loan is right for you.
Each time your credit report is pulled out, your credit score can drop a little. Take note that all inquiries are reflected in your report and lender may get suspicious as to why you have submitted multiple applications at one time. This is why it is recommended to shop first and compare rates and fees before submitting your application to the loan company of your choice.
