As necessary as cars are to our daily existence, they don’t last forever! At some point, they must be replaced or updated with newer and more reliable models. If you are in that situation now, we hope we can help you with useful information regarding bad credit car loans.
If this is your first car, then. you are set for an exciting time as being a new car owner. If you’re upgrading your old junker or buying your first new car, we want you to go into the dealership armed with the most important facts and figures so you can negotiate for the best deal around. Truth be told, car dealers are not always known to be the most trustworthy individuals!
Be prepared by doing your homework and knowing what you want. Study the various loan options and choose the correct one for your situation. It doesn’t matter if you are looking for boat loans for bad credit or motorcycle loans for bad credit, because the process is the same.
For the best experience when you are looking for bad credit auto loans, pay attention to the steps below. You can take the steps in any order, but the point is to get you prepared for your car loan experience.
Helpful tips to getting car loans with bad credit:
- Determine how much you can afford
- Get a trade-in value
- Prepare your down payment
- Get pre approval
- Choose the type of car
Completing all of these steps will help you when you’re ready to get car loans with bad credit. Either go online to check for lenders or find out about car loans for bad credit near me.
Choosing Auto Loans Bad Credit
Even with a bad credit score, you still have attractive options for getting car loans. Bad credit car loans take into account your past bankruptcies, past payment history and your current financial situation. If you are a car owner, the value of the car you are trading in will also make a difference in the type of car loan for bad credit that you can be eligible for. Take a look at some of the loan options below.
Bad credit car loans near me:
Private party car loans – You might find an option to buy the car you want directly from its owner. In this case, you would be making your car loan payments directly to the owner, rather than going through loan company. Be careful in this instance, to confirm that the car legally belongs to its owner. Check that there is a free and clear car title.
Simple interest loans – In this case, the interest is calculate only on the outstanding principal at the time you’re making the payment. For instance, if your original purchase price was $25,000, but you only have $12,000 left to pay, the interest you pay is only based on the $12,000. With this option, you can save money by paying off the car loan ahead of time.
Secured car loans – A secured auto loan uses the car as collateral. If all the car loan payments are made according to the contract, there are no problems. If the borrower does not make the necessary payments, the lender has the right to confiscate the car to sell it and cover the loan.
Unsecured car loans – If you don’t have collateral to secure the loan, you might be expected to pay a higher interest rate.
In-house car financing – This type of car loan give you the option of getting the financing in the same place you are buying the vehicle. This type of buy here, pay here concept is especially suitable as car loans for people with bad credit.
Bad Credit Car Loans
Many consumers have gone through difficult financial times in the past and have poor credit scores. Whatever happened in the past is done, and now you have a bad credit score to deal with. Most lenders understand that not everyone can have a great credit history and they are willing to find a loan type that is suitable.
In other words, having a bad credit score should not keep you from getting the car loan that you need. With bad credit auto loans, your terms might be stricter to protect the interests of the lender. Whatever your situation is, you can negotiate the loan terms with lenders to try to get the best deal possible.
What Is a Low Credit Score?
When you submit a loan application for vehicle financing, one of the facts the lender will check is your credit history. Having poor credit doesn’t mean you can’t be approved for bad credit car loans, but the lender needs confirmation that you will be able to make the payments.
Your credit score lets the lender know if you are credit-worthy. A credit report takes into account your credit history, payment history, bankruptcies, how much you owe, etc. FICO gives a credit score according to that information, and if the score falls beneath 620, it is a low credit score.
Calculating How Much You Can Afford
There are a number of loan calculators to use online. These calculators can help you through each step of the process to find out how much you will be able to afford to spend on your next car. Get auto loans for people with bad credit after punching numbers into the calculator, to get a loan amount.
Using this calculator, you can check your current budget to find out how much you would be able to pay back each month. To find your monthly payment amount, fill in the details of how much you earn each month and how many payments and bills you have.
If you don’t come up with a loan amount high enough to buy a car, see how you can play with the numbers to reduce your current monthly expenses or increase your income until you get to a reasonable loan amount.
Now that you know how much you can afford to pay, you can plug numbers into the affordability calculator. Begin with the following and then tweak the numbers until you find out how much you will need to spend.
- Loan amount
- Annual percentage rate
- Down payment
In addition, you can use a monthly payment calculator to play with the numbers even further, to come up with a monthly payment that you feel comfortable with.
Understanding Terminology for Bad Credit Car Loans
Unless you are experienced with car loans with bad credit, you might not understand all the terms used. Since most borrowers only look for auto loans for bad credit every few years, they are not expected to understand all the small points of how car loans for bad credit work.
However, it’s worth understanding some of the basic terms related to car loans for people with bad credit. This will help you understand what type of car loan will benefit you the most and how to take advantage of the most favorable terms.
Length of loan term – This is the length of time you can take to pay back car loans with bad credit. If your loan term is short, you can expect to have high monthly payments. If you have a longer term, it means the total amount will be spread out into lower monthly payments. Paying the loan off in a shorter term could mean you’ll be paying less overall interest. The loan term can sometimes be negotiated.
Annual percentage rate – The annual percentage rate, or APR, is the rate charged on the principal loan amount. This is the amount you borrowed to buy the vehicle. A combination of APR and loan term will affect the amount of each monthly payment. The APR that is charged can be related to the borrower’s credit history, current market rates, competition and special sales or offers. It can also vary according to the car type, or if it is a new car loan or a used car loan.
Trade-ins – If you are trading in a car, the trade-in value will be taken off your new car’s purchase price. With a trade-in, you may not be required to also submit a down payment. The more you put down on the new vehicle, whether it’s a trade-in or down payment, the lower your monthly payments will be.
Cosigners for auto loans bad credit – For an applicant with a low credit score, it can sometimes help to have a cosigner on the loan. This is a back-up for the lender. If you fail to make the payments on bad credit car loans, the cosigner will be responsible for paying.
Submitting a Loan Application for Bad Credit Car Loans
Now that you have a good picture of what you can afford, it’s time to begin requesting funding for your new car purchase. You will be ahead of the game by far if you go ahead and get pre approval for the loan amount you will need. As a general rule of thumb, you can add an extra 10% to the sticker price of the car you want to purchase. This should be enough to cover taxes, licensing, title transfer, etc.
The advantages of getting pre approval for auto loans with bad credit before going out car shopping are simple. If you walk into a dealership with cash in hand, you are more likely to be taken more seriously. The dealership will need to help you find the auto you need that fits into the amount of money you have been pre approved for. You will be more likely to get the best deal possible.
Before rushing out to look at cars, secure your funding. It will save time later, when you find the car you want. In addition, there is less chance that the car will be sold to someone else if you have your funds ready to pay.
Selecting Your Vehicle
This is where the fun begins. You’ve studied your budget to find out how much you can safely spend and you’ve been pre approved for the loan amount. Now all that is left is to find the vehicle of your dreams!
New or used vehicle?
If you haven’t made the decision towards a new or used vehicle, there are some definite factors to take into account. Look below and then make your best decision:
- Rates can be lower, but the terms can be longer. The loan amount is usually larger than with used cars.
- Car manufacturers might offer valuable incentives, such as low APR, just to keep their models moving. These could be subject to meeting specific credit criteria.
- Cash off sticker price – this can be a clear incentive to buy new!
- Special new car sales events to take advantage of, such as end of the year close-outs or holiday savings.
- Smaller loan amounts, since the average used car price is less. This can result in lower monthly payments.
- Less depreciation – As a new car, the value depreciated by about 20% during the first year. Now that it has already undergone that wave of depreciation, the vehicle is more likely to hold its value. This avoids being in the situation of owing more on the car than it is worth.
- Shorter loan terms – the overall cost of the loan will be less, because the interest will be over a short term rather than a long term. Even if the APR is higher on a used car, the shorter length of time allows for a quicker payoff.
Easier for poor credit types – It is much easier for a consumer with a low credit score to be approved for a used car. Partly it is because of the lower loan amount but also because with a secured loan, the lender has the car itself as collateral, or loan security.
Car dealerships or private seller
Since you already have pre approval for the loan amount that you need to make your car purchase, you can feel free to seek out any type of car that fits. your budget. Go to the area dealerships and let them give you their best offer. Check the classifieds for used cars for sale and go to check them out.
When you find the vehicle you want to buy and you have the vehicle financing in place, the final purchase stage will go very quickly and smoothly.
Refinancing with Bad Credit Car Loans
In some cases, it could be beneficial to refinance your current vehicle with car loans with bad credit. There are a number of reasons to take this step, and it can save you substantial amount of money.
Here are some of the reasons to choose bad credit car loans to refinance:
- To reduce the current monthly payment amount – If you were given an initial car loan with a high APR and the standard rates have come down, you could refinance your current auto with a car loan with better terms. This could make a big difference in the monthly payments.
- If your financial situation has improved – You may have been in a difficult financial state back when you were approved for bad credit auto loans. If you’ve made your payments and your situation has improved, you can refinance your remaining loan to get better terms.
- Has your credit score improved or do you owe less money than before? If you have managed to lower your total debt and raise your credit score, you could be eligible for a better loan when you refinance it. This can lead to lower APR with better loan terms.
If you feel like you could be eligible for better terms now, it’s worthwhile checking out your loan refinancing options.
Finding Car Loans for Bad Credit Near Me
Check out all your local options when shopping around for bad credit car loans. If you understand how each loan type works and you know how much you will need, the loan process can be quick and easy.
For convenience and ease, consider online lenders. You can access the funds you need without running around town, and you’ll get quick answers without a lot of hassle. With online loans, you don’t have to wait until business hours to send in your loan application – you can do it anytime. Online lenders are typically very fast to process your car loan request and give you quick answers.
Montana Capital Bad Credit Loans for Your Cash Needs
At Montana Capital Bad Credit Loans, we have your interest in mind. We want to help you get the bad credit car loans that will fit your situation the best. Whether you are looking to buy your first car or trade in the car you’ve had for years, let us help you get there!
We have a team waiting to help you through the quick car loans process. When you have pre approval for your loan, you understand the loan terms and you know the auto loan rates, you’ll be ready to select your auto.
Reach out to us today!
Don’t wait another minute!
Take the first step today for your quick loan!