Many individuals have bad credit histories. Despite that they still want or need to get loans to buy a car. Can these people really get a car loan? Believe it or not, getting an auto loan for bad credit scored individuals is now almost as easy as obtaining a loan with excellent credit history.
How is that possible? For one thing, these types of loans are collateral-based. This means that either the car that you bought with the loan or your some other valuable asset is at stake. So, if you fail to pay the monthly payments, the lender can take your car or asset away.
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Unfortunately, because you have no proof that you will pay the loan (in the form of a good credit history), the lenders want to get their investment back as quickly as possible. They do this by implementing higher interest rates.
Some lenders may even take advantage by overpricing their loans by charging high fees for making the loan. You may end up paying up to three times the car value. Do not fall for those. Be sure to research the car you want. Then review and compare the offers of different financial companies. This will give you an idea which lenders charge a higher premium for their loans.
Here are a few more tips to guide you towards the loan process:
• Request a copy of your credit history. It is advisable to check your credit rating at least once a year. Check for errors or miscalculations.
• Choose the car you want but do not forget that you have bad credit that will impact your ultimate choice. Go for cars that are less expensive but still of good quality.
• Compare lenders and their offers. Some lenders may have too high interest rates while others may be more affordable. Pick the one that offers lower rates and fewer fees or costs.
• Think of your budget. Determine how much you can afford to avoid missing out pay schedules. For example if for every $100 loan your monthly payment is roughly $2, then for a loan amount of $1,000, your monthly payment will be approximately $20.
• Prepare the necessary documents for the loan application. These include proof of your income, a valid driver's license and proof of insurability.
• Be prepared to make a down payment on the car of your choice. The larger your down payment amount, the better your chances of getting a more favorable loan.
Getting an auto loan for bad credit rated individuals may take several tries. Do not be disheartened if you get a refusal. There are plenty of lending companies out there. It's a matter of searching until you find the right one that fits your particular needs.
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