If you plan to obtain a car loan and you have a history of bad credit, you may find that getting approved is more hassle--and expensive--than you realized. Here are three things you should know about bad credit car loans: 1. YOU'LL PAY MORE Because you have bad credit--which usually means a history of late or missed payments on other loans--lenders will consider you a riskier borrower. To offset this risk, they'll charge you a higher interest rate. In some cases, you may get charged extra fees, too, because of the additional paperwork associated with your loan. In general, expect to pay about 3% more on your interest rate, depending on your credit history, but be wary of any lender that wants to charge you an exorbitant rate. Compare quotes from various loan companies to ensure you're getting a decent deal. 2. YOU'LL HAVE TO BORROW LESS Because you're a bad credit borrower, most lenders won't want to take the risk of lending you a large sum of money. In many cases, they'll put a "cap" on the amount you can borrow, and it's likely to be less than the average cost of a new car. Chances are you'll only qualify for enough to buy a small economy car or a used vehicle. The amount you can borrow may also be based on your current income. 3. YOU'LL HAVE TO FILL OUT MORE PAPERWORK Not every lender is willing to work with a bad credit borrower, and those that do often require additional paperwork. You'll have to demonstrate solid proof of your employment history and your income so the lender knows you're financially capable of paying back the loan. Your loan terms may be stricter than usual, too, which means you'll have to sign agreements about the terms. Here is a list of recommended Bad Credit Car Lenders online. It's important to use a reputable lender online to make sure your personal information is secure. You may find that most lenders don't want to work with you because of your bad credit history, but it is possible to find a loan company that will approve you for a car loan. Try searching online to find a lender that meets your special needs. |
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