There are so many car loan lenders who offer car loans for bad credit, some of which can be found on US Bad Credit Loans.
They all have different rates, terms, and pros and cons. You shouldn’t just pick one randomly and hope it suits your needs. You have to know which one is most suitable for you.
What Is a Car Loan?
A car or auto loan is a simple interest, high capital loan that is obtained for the sole purpose of buying a car. With the average price of a new car being about $42,000, many need an auto loan to buy one.
They are long-term loans that span a period between 3 and 5 years, or maybe even more, depending on the agreement between the lender and the borrower. The long term means low monthly payments, making it generally affordable by lenders.
But also, the longer the term, the more interest you will end up paying in total. Remember! It is better to pay the higher interest than to sign up for a monthly payment that you will have to struggle with.
A car loan is a secured loan. This means that it needs collateral. The car isn’t totally yours until you have paid back in full. In a situation where you default on your monthly payment, the car can be repossessed by the lender.
Car loans in general have a lower interest rate than personal loans. The interest rates can even go below 2% but can also go as high as 27% depending on different factors such as your credit score and the lender. Generally, the lower your credit score, the higher the interest rates.
Irrespective of the rates, it is important to know that you usually have to pay a down payment of a percentage of the cost of the car. This down payment can be monetary or be in the form of another car that was traded in.
Types of Car Loans
Lenders usually offer different interest rates for old and new cars. This is due to the fact that cars depreciate in value. If you default on your loan payment, the lender will sell your car to get the money back.
In a situation where the car you got was used, the value might no longer be high enough for the lender to get his money back.
New cars, on the other hand, will still have a high enough value for the lender to get their full money back. This is the reason for the different types of car loans.
New Car Loans
As the name suggests, it is a loan obtained to buy a new car. According to Experian, the average interest rate for a new car in the US is 4.07%. The loan terms for new cars usually range between 2-7 years
Old Car Loan
Old car loans have a more expensive interest rate of 8.62% on average and usually span between 1 and 5 years.
Auto Refinance Loans
While paying a high-interest auto loan, if you find another offer with a lower interest, you can use this other loan to replace the current. The new one is called an “auto refinance loan”.
How Do I Choose the Most Suitable Car Loan Lender with Bad Credit?
Different lenders offer different options. What is suitable for you might not be suitable for another. Your choice of lender should depend on your income, the cost of the car, and other factors.
When going for a car loan with bad credit, here are some of the things to look out for in order to make sure you choose the most suitable bad credit loan lender.
Do Lenders Allow Co-Signers?
Cosigners are people with higher sources of income and credit scores who are willing to sign a loan with you. This is necessary if your income is not high enough to get loan approval.
If you have such a person willing to help you out, you have to confirm that the lenders allow it.Remember to make sure to repay the loan so as not to drag the person into debt and reduce his/her credit rating
Do They Report Payments?
If you are looking for a car loan with bad credit, then you probably have bad credit. You might be trying to use the opportunity to build your credit score.
If you are in this category, make sure that the lender reports payments to at least one of the three major credit bureaus-TransUnion, Experian, and Equifax. If they don’t, no matter how promptly you pay your debt, it will not affect your credit score.
How Quickly Do They Fund Borrowers?
In a case where you have an opportunity to buy a usually expensive car at a giveaway price or need a loan for some emergency car purchase, you might have to look out for a lender that will fund your account as soon as possible. Many of these quick funding lenders for bad credit can be found on USBadCreditLoans.
Are You Allowed to Compare Rates?
While many lenders offer you loans at a fixed rate and term, online brokers give you the option to choose from a number of offers. This way you can compare and select the one that works best for you.
Do They Carry Out Soft or Hard Credit Checks?
Even though these lenders might still offer you a loan with bad credit, the amount they are willing to offer will still be influenced by your credit score. Every lender has to carry out a credit check.
While soft credit checks do not affect your credit score, hard credit checks can further damage your score.
The first step to acquiring a car loan with bad credit is to find a lender that offers what you need. Car loans can be difficult to acquire with a low credit score, but with the right lender, you can get a loan that suits your desires.