Credit Repair: Car Financing for Someone Who Has Bad Credit
June 5, 2008
The literal meaning of term bad credit is poor credit scoring. This term is used for the person having had credit record due to non repayment of loans, bills, mortgages, services on time and such person is admitted as high risk for financial firms. The meaning of bad credit for an ordinary person is ineligibility to get loans at relevant rate of interest. This surrounds us with a question: Is it advisable to apply for car loans in the situation of bad credit?
Consider the Implications
Your poor credit score negatively effects you in may ways:
- Depending on the state of your credit, your loan request may be denied.
- The second negative effect of bad credit is that the lender can charge high rate of interest.
- In considering the purchase of a car, the seller might not give you a good price, or may charge extra.
There are niche lenders that will loan you the amount you’ve requested, but you will be required to repay the amount you’ve borrowed, plus the rate of interest on that particular loan. A person with an average credit rating can find financing for a car for 10% interest rate, with a 7 year term to repay that loan. Conversely, someone with a poor credit score can find financing for a car with a rate of interest somewhere between 5% and 26%.
A person with bad credit will have 2 to 4 years as their loan term. Also, you may be required to offer 50% of the total loan amount as a down payment.
Find the Answer
After considering the implications of bad credit, it’s easy to see that securing a car loan, if you have bad credit, is a bad idea. If you are considering the purchase of a new car and have bad credit, consider these questions: Am I able to pay the high interest rate for a “high risk” loan? Am I willing to sacrifice a large portion of my income to pay this loan each month?
Isn’t there a way to find a decent car loan, even if I have bad credit? No. But there is a solution.
The ramifications of obtaining a loan for the purchase of a car, if you have bad credit, are great. It is best to avoid these types of loans and to focus on improving your credit score. Start handling your finances efficiently and make your payments on time.
Improving your credit score takes time. Give yourself a few months to repair your bad credit, and delay the purchase of a new car until you accomplish your goal. Focus on rebuilding your credit rating, and wait until you’ve done so to purchase a new car. You will be able to secure a loan with a lower interest rate, and perhaps a better price as well.
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