Obtaining a car loan can be difficult when you have poor credit history. Most lenders are unwilling to approve applicants with poor creditworthiness, which can lead you to look for other options. Two of the most common alternatives are either a bad credit auto loan or a dealership paid for here.
Car loan with bad credit
A car loan with bad credit is a car loan for borrowers with one Subprime Credit Score (usually under 620). These loans give people – with bad credit, no credit, or previous credit problems such as bankruptcy or repossession – the opportunity to finance a car.
Car buyers with poor credit ratings can find one of these loans from a specialized financial dealer. These dealers are affiliated with subprime lenders willing to work with people with damaged credit.
The process of buying a car is very different with a bad credit car loan. You will first sit down with a finance manager in the financial specialist trade. They go through your application and determine which of their lenders can help you. Once approved, you will be given a payment section and then you will select a car from the dealership’s inventory that meets this requirement.
This process ensures that you are not overspending and that you are staying within your budget. This gives you the best chance of successfully completing the loan. And that’s what you’ll want to do too, because a car loan can help you with that improve your credit. Having your credit and on-time payments reported to the credit bureaus can dramatically improve your credit score by the time the loan is repaid.
The disadvantage is that these loans have above average interest rates. This is because the interest rates are largely determined by your creditworthiness. But if you improve your credit score by making timely payments, the chances are good that you will get a better interest rate on your next loan.
Buy here Dealers pay here
If you’ve been turned down by a specialized financial trader, it may be time to give it a try buy here pay here (BHPH) dealers. These places have many other names, including self-financing and the grade auto-lots.
The biggest advantage of these places: They don’t do a credit check. This is because they don’t use lenders and they do their financing in-house. BHPH dealers don’t care about your creditworthiness, they just need to show that they have a steady income. For more offers, checkout our website.
They arrange the loan with the dealer. Again, sit down with your finance manager and determine what you can afford. Once you figure that out, you can choose a car from inventory that suits your needs.
However, getting a car loan from a BHPH dealer also has some disadvantages:
- The stock is usually limited to older used cars.
- The interest rates are high.
- You may need to make your payments in person at the merchant, which is where the name “buy here, pay here” comes from. Also, you may have to pay weekly or biweekly, which can be inconvenient.
- You are not allowed to report your positive payment activity to the credit reporting agencies.
The last point can be a blast. If they don’t report your payments, your loan is not helping to improve your credit score. However, some BHPH dealers report both loans and payments. So be sure to ask before you agree to a loan.
The bottom line
When you have bad credit and need a car loan, you need to look for alternative options. But it can be difficult to find a dealer who can handle your situation. That’s where Car loan express come inside.
We have built the largest network of specialist finance dealerships in the country. We can connect you to one in your area. All you have to do to get started is ours easy online application. Our service is free and our process is quick. So the sooner you apply, the sooner you can drive off with your next car.