Most people assume that if they have bad credit, they won’t get car loans. It may come as a shock to most people but 25% of Americans have bad credit history. This figure may have gone up since the number of foreclosures around the country has steadily gone up in the last year. Foreclosure and sub prime lending has also lead to the financial crunch. This has seen the government provide huge cash bailouts to banks and other companies.
Before applying for bad credit car loans, you should review your credit history
If you find that there is a problem with the credit history, then you should report this immediately. As a consumer, you have the right to receive your free credit report from Equifax, TransUnion and Experian once every 12 months absolutely free. You can get it free on www.annualcreditreport.com. You can get your credit report for free here. A credit score of less than 550 is considered undesirable, while a score of 720 and above is considered extremely desirable. Credit scores can range between 300 and 850.
Before you go shopping for bad credit car loans, calculate the amount that you can pay for a down payment as well as your monthly payments. Remember that you would have mortgage payments, other loan payments as well as daily household expenditure. Add these figures and deduct from the income of the household. This is the amount that you can pay for the monthly payments for your bad credit car loans.
When applying for bad credit car loans, prepare documentation. You would need to keep your income pay slips, credit history and other loan details ready. This helps in getting speedy approvals for the bad credit car loans that you want.
Cut the dealer out
When you apply for the bad credit car loans through dealers, know that you would be charged a higher interest rate. All dealers have relationships with banks and financial institutions and get a cut from them for getting bad credit car loans customers for them. You can cut short the dealer and apply directly to the banks and the financial customers. You would also get a lower rate of interest from the banks as compared to the dealers.
It’s important to shop around for rates
The rates for bad credit car loans would vary from lender to lender. Take some time and see what each lender has to offer. Ask the lenders to give you a matrix that detail out the costs associated with bad credit car loans. When you have the costs in writing for the bad credit car loans, its simpler to compare. Remember that if you have bad credit scores (between 550-719), you can be charged between 10-20% interest rates. While those that have great credit scores (between 720 and 850) are charged a much lower rate of interest (ranging between 6.5-9%).
If you have a checking account in a particular bank, then approach them for bad credit car loans. Most banks have entire departments that are devoted towards extending bad credit car loans. These banks favor clients that are pre existing customers of the bank. Of late credit unions have also started extending bad credit car loans to customers to expand their business. You can approach these credit unions too.
Your credit score is ever changing. This means that within 2-3 years, your credit scores can improve and you can get the current bad credit car loans refinanced at a lower rate. All this translates into real dollar savings for you.