If you’re in the market for a new or used car, but have bad credit, a subprime car loan may be just what you need. A subprime car loan is available from many different sources. Some of the best places to get one are credit unions, where the interest rates are generally low. You can also try shopping around and getting a co-signer.
Lower credit scores mean higher interest rate
Your credit score plays a major role in determining your interest rate, and lower credit scores mean higher rates. The reason for this is simple: the lower your score is, the more risky you are to a lender. So, a higher interest rate means that you will have to pay more for your car.
Credit scores are numerical representations of your credit history and are calculated based on a number of factors, including your repayment history and credit mix. Higher credit scores mean better interest rates. In general, people with higher credit scores paid lower interest rates than those with lower scores.
Credit unions offer low interest rates
When you are in need of a car loan but have poor credit, you may be interested in credit union car loans. These lenders use money that members deposit to make loans. They charge interest on the money they lend, a percentage of the loan amount. This acts like a rental fee and is due when you are ready to repay the loan. This revenue is used to run the credit union’s daily operations. This allows credit unions to offer lower fees and higher savings dividends to their members.
When you choose a credit union as your auto loan lender, you can expect lower interest rates. Some credit unions also offer flexible payment plans. However, if you don’t have a great credit score, you may need a co-signer to get a car loan.
Shopping around
Shopping around for bad credit car loans is a good idea if you want the lowest rate possible. The trick to rate shopping is timing. Ideally, you should apply for multiple loans within a 14-day window to minimize the impact on your credit score. Direct lenders are the easiest to find, but you can also use traditional lending institutions.
When shopping for a large loan, it’s always good to compare rates, terms, and conditions. The smallest differences in rates can add up to large numbers over the life of the loan. Depending on your credit score, debt, and income, different lenders can offer you different prices for the same amount of money.
Getting a co-signer
The best option for getting a bad credit car loan is to have someone you trust co-sign your loan. You’ll want to make sure the person has a high credit score and will pay their bills on time. It can be difficult to ask a distant relative to co-sign your loan, but you’ll most likely get a better deal if the person is a friend.
However, a co-signer’s name will show up on your credit report as if it were your own. This will mean that any late payments will show up on your credit report. Additionally, if you don’t make payments on time, the lender can sue you and garnish your wages. The lender could even liens your property.
Getting a guaranteed approval dealer
When you’re trying to get a car loan for bad credit, you might be tempted to approach a guaranteed approval dealer. These car dealers don’t look at your credit report, but instead use your income to determine whether you qualify. These types of dealers usually offer used cars and tend to charge higher rates than subprime lenders.
While a guaranteed approval dealer may promise the world, it’s important to know exactly what you’re getting into. The amount of money you’ll be able to borrow is important, and knowing the exact amount of your loan will help you negotiate better. You’ll also be able to make a larger down payment, which could lower your interest rate. After a year, you can check your credit score and refinance your loan if you need to.
