Looking for a car loan and your credit has seen better days? Relax, a lot of us have less than stellar credit. Fortunately, some lenders specialize in so-called “sub-prime” borrowers or those with bad credit, and they can usually get you a loan. You should know right up front, however, that these sub-prime loans are not the same as ordinary loans. The finance guys at Lynch Chrysler Dodge Jeep Ram of Mukwonago, WI, told us not to forget to mention that you’ll pay more money in terms of a higher interest rate and/or a longer loan term, but that’s simply the nature of the beast.
What you will Find:
The auto loan business is very competitive. Interest rates will vary dramatically from lender to lender, so shop around to see what kinds of rates you can get. Today, the internet makes comparison shopping easier than ever. Many car dealers even have their own internet sales divisions these days. A good technique is to get quotes from a number of different sources and ask your favorite lender or dealer if they can match the lowest rate.
Don’t Forget About your Bank or Credit Union:
Before you go shopping for a car, it may be worthwhile to get quotes from local banks and credit unions. Because they focus on serving small communities, they often have good rates, even for buyers with bad credit. This is particularly true if you already are a customer with the institution.
Find a Co-signer:
If you can’t find a reasonably priced loan on your own, consider a co-signer. A co-signer becomes legally responsible for the repayment of the loan. Typical co-signers are parents or relatives. If you have poor credit, you may benefit from the lower rates offered to your co-signer, assuming they have better credit than you.
Put up Collateral:
Many people with poor credit put up a valuable asset, such as a home, as collateral in order to get what’s known as a secured loan. This can be risky, however, because if something happens and you can’t make your payments, you might lose the collateral to the finance company.
Pay Attention to Loan Terms:
Common tactic lenders use when financing buyers with bad credit are to offer attractive monthly payment rates. If you focus solely on the amount of your monthly payment, you might overlook the total cost of your loan. While a $350 monthly payment might sound appealing, remember that paying $450 a month over 60 months results in a much lower total outlay than paying $350 per month for 84 months.