subject: 4 Things you need to know about Guaranteed Car Finance [print this page] Guaranteed car finance is one of the limited loan options for no credit, bad credit, and no income individuals. They usually don't qualify for standard loans offered by lenders. This is the reason why they stick to guaranteed car finance despite the disadvantages given below.
Relatively Higher Interest Rate
The relatively higher interest rate is the most disadvantageous feature of guaranteed car finance. This is because the credit records of individuals taking this kind of loan are not that good lenders consider them as default risks. They have the greatest tendency to default compared to those with good credit records.
This makes interests of guaranteed car finance approximately 15% higher than that of a standard loan. The higher rate gives lenders the security against the risk of not being paid back of the amount they offered on a loan.
Higher Monthly Payments
Compared to a standard loan, monthly payments for a guaranteed finance is much higher. One of the reasons is the high interest rate tied to the loan. This also gives the lender assurance that the borrowed amount is returned in a brief period.
Greater Down Payment Amount
The down payment involved in a guaranteed finance is also relatively higher. While most good credit holders get a lower or no down payment loans, bad credit holders are most of the time required to pay a 20% down payment or higher. For example, the price of a car or trade in value of car is $10,000, bad credit holders using a guaranteed finance has a down payment requirement of $2,000 dollars while good creditors can get the car for a down lower than this.
Not a Good Solution for a Bad Credit Record
Guaranteed car finance as a whole is considered as a not so good solution for fixing a bad credit record. This kind of financing can place a car buyer in trouble rather than improving his or her credit status. This is because the interest rates, down payment, and monthly payments are higher.
In addition to this, lenders are strict regarding the time of paying the bills. A delayed monthly payment could instantly mean penalties. For example, a delayed payment of $20 can increase ten folds due to penalties. This could cause a payment of almost $200.
4 Things you need to know about Guaranteed Car Finance
