Type in the term “Bad Credit Auto Loan” into your search bar and you will be amazed at the results. There are many, many choices. How do you decide where to apply. Once you apply which loan offer should you take. The answers to these questions become easy if you know a few insider secrets. Let me tell you that I am a car dealer and that what I am about to share is part secret and part common sense.
The first key is applying to the right source of funds. If you look at the results of your “Bad Credit Car Loan” search you will notice that some of the listings are from banks and / or loan companies (Finance Sources Direct), some are from car dealers (Money Finders), some are from other companies (Lead Providers). Applying directly to the bank who will loan you the money directly or allowing the car dealer to find the money on your behalf is preferred. Lead providers take your information and sell it to car dealers. Sometimes lead providers sell your name to multiple dealers so you get many calls and emails. You can usually tell a lead provider because they use terms in their ads like “Nationwide Network of Lenders” or “Our Dealer Network” does not just make sense to eliminate the middleman? (Common Sense) If you apply to banks they will usually give you an approval based upon a dollar amount or monthly payment that you qualify for. Then you take this approval and start shopping for a car that you can buy in that price / payment range. It can be difficult to do the math so be sure and find a payment calculator website and explore your options. If you apply to a dealer they will usually provide a choice of cars that they have in stock that match your approval. Most customers find this method easier because the dealer does most of the work. Look for a dealer who provides a large selection of cars in your price range. There are dealers who specialize in working with “Bad Credit car Loans”. Look for these type dealers.
The second key is selecting the best loan package for you. Let me first say that “Bad Credit Car Loans” are always high interest loans. Banks set interest rates by the risk that they take in making a loan. Customers who repay slowly or not at all are “Bad Credit Customers” and therefore are high risk loans. High risk means high interest rates. Here is the secret. You can minimize the interest you pay by selecting a short term, low dollar amount loan. Think of this loan as a stepping stone to your next car loan. Look for a 1 or 2 year loan that is under $ 10,000. You can repay the loan fast, not pay a lot in interest, and be in a position to trade faster. Many people make the mistake of buying a car and getting a 60 month, high interest rate loan. They struggle with the high payment these loans come with and and actually hurt their credit rather than help it. (A typical bad credit 60 month loan for a $ 6000 car will carry a $ 5000 interest cost) Look for a nice, cheap car. Keep it a year or two and then get your dream car. The secret is to minimize the cost of the loan. (A typical bad credit 24 month loan for a $ 6000 car will carry a $ 1800 interest cost)
The benefit to using the computer to help you research and select the right finance package is the time you will save. Narrow down your choices and then pick up the phone and ask questions to further narrow down your choices. There are two keys to success. 1. Find A car dealer who specializes in Bad Credit Loans and 2. Select a short term, low dollar amount loan and you will improve your credit and chances of getting a great deal.