Auto Loans, Bad Credit–Do the Two Really Mix?

Auto loans, bad credit–can you really make the two of them be friends? It may seem unlikely, but you CAN actually get an auto loan if you have bad credit. It may take a little more searching than you’re used to, and you will definitely pay a higher interest rate, but the fact is, bad credit should be no obstacle to you getting financing for a car. In fact, many people use bad credit auto loans as a means to shore up their credit by opening a new credit line and making timely payments on it. That way, they can get better credit offers later. It’s a good strategy if you’re starting over with your credit, or even starting from scratch.

The reason that most auto loans/bad credit scenarios work out so well is because the car itself is being used as collateral for the loan, so there is very little risk to the lender, no matter how bad your credit may be. If you don’t make your payments, the lender simply takes back the car and recoups the company’s losses by re-selling it. That’s why you see so many car lots with signs out front that claim they will finance anyone.

Yes, you know you will be paying a higher interest rate than you would if you had good credit. However, don’t automatically take the first offer you’re presented with, thinking it may be the only offer you get. It won’t. In fact, you’ll likely get an abundance of offers if you shop around enough. Different places have different requirements and different abilities to loan at good rates, so get several offers before deciding on the one you want. Don’t let yourself be pressured into signing on the dotted line right away, either. You need to do your due diligence on this, and you have every right to compare what different auto lots can do for you.

So, don’t think that the auto loans/bad credit combo is out of your reach. It’s not. Just get out there and do some comparison shopping, and you could soon be driving home in a great car at a good rate and restoring your credit, too.