You have always wanted to buy a car, but your credit history has just gotten worse and worse over time and even though you have managed to save up some money, your credit records will not just vanish into thin air. Once it hits the credit record, it is there to stay for a while and once you have bad credit, it’s very hard to get auto loans from anywhere. Yet there is no need to worry as there are dedicated Loan agencies that will help finance you even on the face of bad credit. We’ll tell you how it works, if you will get a loan despite bad credit and what its limitations are.
Who qualifies for an auto loan with bad credit?
Since most people come to these agencies with bad credit in the first place. There isn’t a limit for who can apply for this sort of loan. You may even be on a chapter 13 bankruptcy and still get an auto loan. The qualifying factor for an auto loan with bad credit usually depends on the Income that you are getting and your budget. The credit record will not affect you from getting a loan but it will affect you in terms of the loan per say.
How does it work?
Bad credit auto loans are basically given by people who don’t really need a credit history to approve a loan. Since credit companies tend to work better if the consumer will take a longer time to pay off the loans as there is a certain cost incurred due to interests. The credit companies will judge an interest rate depending upon your income, any property which is unattached to other loans and it will also use your credit record to judge an interest rate. The better your credit record, the lower the interest rate. The better the downpayment, the lower the interest rates. The loans work by customizing the amount lent with all the factors that are unique to you. There is no bank standard here.
What are its benefits?
There are a lot of benefits for this kind of loan. The greatest advantage that the auto loan with bad credit gives lies in the name itself. It is incredibly hard to get a loan with bad credit and even though you have the means and the income to buy a car, the bad credit will always come in the way of that, but now you will finally get to buy your dream car without having to worry about not getting a loan because of your past mistakes. This sort of loan also helps when you have a bad credit record but it’s not as bad as it sounds. It has just missed the standards set by certain banks and you can’t get a loan from them. The auto loans that you get despite bad credit work on a individual system where your interest rates and time given to pay it back completely depends upon your credit record and your income. If you have a decent income and a not so bad credit record, you could still get a very good deal for your car.
What are its limitations?
The auto loan with bad credit might seem like a boon to you, but it could also turn into a bane. The auto loan you get with bad credit comes with an unique identity. The interest rates determined, the amount given, the time frame, the increase in rates and so on are all determined with your income and credit background. So assuming that you already have a bad credit, the interest rates will be high and the time frame will be more extended that you need it to be. Thus making it harder for you to pay off this loan, this could have the compounding affect that you are really trying to avoid. The interests rates are higher than normal rates that you get and the time frame will not really suit you as much as the other loans that you get.
Auto loans during bad credit could be a good idea if you know that you can pay them off fully in time. You need to have that certainty. If you do then it can be very useful to you in the eyes of bad credit, but if you do not have a proper planned structure in paying it back, this could put you deeper into the hole that has already surfaced. Exercise restraint when you do apply for one and make sure that you have run out of other options before opting for this one. This should be your last resort.