Introduction
There are different categories of borrowers as classified by lenders, and the rating criterion depends on the credit score. A credit score of less than 620 puts one under the subprime category of borrowers and if it is above 700, then one is ranked in the prime borrower category. Of course, prime borrowers are usually get better rates on loans as opposed to their subprime counterparts. And when it comes to a bad credit car loan, it doesn’t get any rosier and very many factors have to be considered before going for any deal.
Loan Qualification
Despite the bad credit car loan adverts that are seen on websites and other media, it is likely that not everyone with bad credit score can qualify for the same. There are other factors that the lenders consider, like monthly income and one’s age. Secondly, not every lender is willing to extend a bad credit auto loan to their clients. Thirdly, the loan is in most cases restricted to certain cars alone, and what might be one’s preference might not necessarily be on the list of cars for which a bad credit loan can be extended.
Considerations to Make
When going for a bad credit car loan, the first thing that you have to consider is the amount of down payment that you are being asked to make. A higher down payment means a lower loan extended for your car purchase. Ideally, any down payment above 20 percent of the car price is considered a better option for people with poor credit rating. The second consideration with these types of loans is the interest rates. Clearly establish the terms and conditions under which the rates are being offered and whether these rates are subject to certain changes while still servicing your loan. Such factors include insurance rates, penalties for early pay offs and so on. Penalties are sometimes imposed on early payoffs and this can lead into paying heavy interest rates on the loan.
The third consideration would be the type of consigner or guarantor for loan. If one picks a consigner has a high credit score, then this can help in bargaining for better interest rates on the loan. Last but not least, consider the difference between the interest rates for repaying the loan automatically from payroll check off and having to remit it from the credit card. If the repayment is an automatic check off, the interest rate can be slightly lower.
Tips and Comments
As much as everything is going online, it should be noted that the online bad credit car loans have to be scrutinized more closely. Be sure to carefully read the fine details in the terms of the loan. Remember to also make a choice as whether to go for the car loan financing from a financial institution like a bank, or a financing option offered by the car dealer. In most cases, the car dealer loans might be of a lower interest rate than that of banks in cases of bad credit. But the best option for any type of loan is always acquiring one through a credit society. If you are in a position to qualify for one, then go for this.
