Car Loans for Poor Credit

by Gray Peters

Nearly every day I see ads – freeway ads, internet ads, and TV ads – appealing to car buyers with bad credit. The constantly echoed mantra is “we finance everybody, regardless of credit score.” The fact is, most of these advertisers aren’t lying; they’re being truthful about the fact that they’ll lend to nearly anyone. The question is whether they’re acting in the best interest of their customer.

As a person looking for car loans for poor credit, you need to accept two realities before you do your first web search for a new car or visit a single dealer: you’re going to pay a higher interest rate and you’re going to have to make a higher down payment, period. Those two facts are a foregone conclusion. Where you need to be cautious is in deciding whether the price of the car and the interest rate you’re being offered are anything reasonable.

The research I’ve done tells me there are some very unscrupulous lenders who will try to take advantage of your credit-challenged status – taking car loans for people with poor credit to another level. For example: they know that you’ll feel your options are limited due to your low Fico score, which means you’ll be less likely to walk away from their car lot if you really believe you won’t be able to find better deals out there. Knowing that, they’ll take a car whose normal value would be somewhere in the $2,500 range and stick a price of $5,000 on it. Then they’ll say they need $1,500 down and finance the remainder at something like 23%.

Sure, you could walk away with a car, but almost anyone’s standards you got screwed (pardon my french). The key to avoiding this situation is to do your own research on different makes and models of cars you might be interested in buying, studying their blue book values beforehand so you’ll at least have a sense of whether the dealer is trying to take advantage of you.

One of the best places to get a car loan with bad credit is an actual new car dealership (used cars got their reputation for a reason). If you can actually afford a new car, you’re much more likely to be treated honestly and fairly by a new car dealer who doesn’t just make their money from these outrageous financing deals – they actually profit from the sale of the car. That gives them better incentive to give you the best possible financing options so you’ll actually purchase the car.

The burden is ultimately on you to make sure the deal is in your best interest; you can’t count on anyone to care more about your financial situation than you do. My best advice is to get a small, economical car with you’re using a poor credit car loan to get it. Drive a little beater for a couple of years while you reestablish your credit and save some money, and then you can go out and buy a car you really want with terms that won’t make your financial advisor sick to his stomach.

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