Many banks and car dealerships make it difficult, if not impossible, for consumers with bad credit to secure a poor credit auto loan. Consequently, consumers with credit challenges must seek alternative financing options.
Many lenders and car dealerships specialize in offering guaranteed auto loans to customers with bad credit. These loans are specifically designed to meet the needs of credit challenged consumers. They have higher fees and interest rates; additionally, they often require a significant down payment. On the other hand, if a consumer has bad credit, guaranteed auto loans are a solution to securing a car title loan.
With any loan it is important to understand its terms and conditions, particularly the interest rates and fee assessments. In many instances, the interest rates on guaranteed auto loans are several times higher than the average rate. Most guaranteed loan rates are between 15% and 22%. As a result, car payments are often significantly higher than traditional car payments. In addition, the late penalties on these loans are much higher than typical loan fees. With an average car loan, debtors are assessed between $10.00 and $20.00 for late fees; however, many bad credit auto loans charge up to $50.0 for late penalties.
Finding a bad credit auto finance is not difficult. One way to find lenders offering these car loans with bad credit is to search the Internet. Several lenders are specifically designed to conduct business through the Internet, and they allow borrowers to complete the loan application online. Most of the time, approval is granted within 24-48 hours. In fact, many bad credit auto loan lenders advertise instant approval. Moreover, some websites act as a clearing house allowing borrowers to enter their information for lenders to compete for their business.
Checking local dealerships is another way for consumers with credit challenges to find auto loans because many used car dealerships finance their own loans. These dealerships often advertise in-house financing. Whether you choose an online lender or a local dealership, it is important to thoroughly research the company.
Checking the company’s Better Business Bureau (BBB) profile is a reliable source of information. Be wary if a company has more than a few complaints within a year especially if they are not satisfactorily resolved. An unsatisfactory BBB grade may indicate that the company has poor business practices.
Although instant loan approval does not require a credit check, consumers must provide documentation of identity, residence, employment, and sufficient income. Before securing a loan, lenders need copies of the following: driver’s license, social security card, pay stubs, utility bills, and mortgage coupons or lease agreements.
Another requirement of guaranteed loans is a hefty down payment. Because guaranteed auto loan lenders are willing to lend money to consumers with bad credit, they require applicants to provide at least 20% of the car’s selling price as a down payment. Typically, lenders grant approval to customers meeting those requirements.
An additional type of guaranteed auto loan is the blank check auto loan. Banks and lenders pre-approve these loans before consumers purchase a car.
Blank check loans are traditionally reserved for consumers with excellent credit; however, some finance companies offer blank check auto loans to borrowers with blemished credit.
When securing a blank check car loan, lenders often place restrictions on the type of car you can buy. In many cases, the automobile must not be more than seven years old, and it should cost approximately $8,000 or more. Also, the odometer should have fewer than $69,000 miles.
To car dealers, purchasing a car with a blank check is like purchasing with cash. Subsequently, buyers with these loans have an advantage when they are negotiating the price of the car they want to buy. However, it is wise for buyers not to specifically mention the amount of their pre-approved loan until they have negotiated the car’s price, including fees and taxes.
Like all bad credit auto loans, the interest rates are significantly higher than prime rate loans; moreover, the terms and conditions may not be as favorable. In spite of this, for consumers with derogatory information in their credit files, these loans offer them the opportunity to re-establish their credit and purchase a vehicle.
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