Car Loans With Very Bad Credit

It is possible for a person with very bad credit to get a loan to finance the purchase of a vehicle .

Even people with very bad credit can get car loans, because car loans are secured loans. In a car loan, the vehicle itself is the collateral. If the person doesn’t pay the car loan, the lender can simply repossess the vehicle financed.

Limitations on Car Loans With Bad Credit

Even though they are able to get car loans, people with bad credit will find their car buying and financing options limited.

Lenders will generally charge a very high interest rate to car buyers with bad credit. This  rate can be between 7 and 18% depending on conditions and terms. Many car dealers will give a lower rate if the buyer is able or willing to make a down payment. Those who can’t make a down payment will usually have to pay a higher rate.

Buyers with bad credit may also qualify for lower loans especially if they have a limited source of income.

Car Buying Options Limited

Car buyers with bad credit may find their options limited in other ways as well. Since the amount of the loan is limited they may be restricted to cars of a certain price.

Many car buyers with bad credit are restricted to buying used cars or cheaper new cars. In many cases dealers will try to unload vehicles they can’t normally get rid of on people with bad credit.

The way to get a good car when shopping for a car with bad credit is to shop around. Avoid dealers with limited selection and try to avoid shops that specialize in bad credit financing.

If you are forced to buy a used car try and get from a dealer that will cover the service costs. This way the dealer will have to pay for repairs to a clunker. Some dealers even advertise that they will service used cars they sell.

Requirements for Getting a Car With Really Bad Credit

The main requirement a person with bad credit will face when trying to get a car loan is to prove they have a steady source of income such as a job, pension or government benefit. Most dealers will work with a person who has a good source of income. They may be willing to lower the interest rate or give better terms to a person who agrees to make higher payments.

Those without a steady source of income will probably have to come up with a down payment or a trade in. A trade in is another car that the dealer will take in lieu of a down payment. To trade in a car you will have to clear title to it. Some dealers will take cars that are still being financed as trade ins .
A down payment or trade in can reduce the cost of the car loan and could get a borrower better terms.

It is possible for a person with very bad credit to get a car loan; however, such a person will have to expect to pay higher interest and face restrictions.