Getting a car loan with bad credit is a difficult task. Most car dealerships are not prepared to deal with people with a bad credit score, no credit or with those who have gone through a bankruptcy. There are however, banks and private lenders willing to grant bad credit car loans. And, if you still cannot get finance through a Bad Credit Car Loan, there are still other options that we will explain in this article.
Purchasing a Car with a Bad Credit Loan
If you have bad credit, the usual method for getting finance to buy a car is applying for a bad credit car loan. As stated at the beginning of this article it is somehow difficult to get finance with bad credit from car dealerships. Nevertheless, some car dealers may be able to provide you with finance but they will probably charge you very high interest rates.
Banks do not usually provide finance for people with bad credit but if your problem is that you do not have a credit history at all, starting a relationship with a bank can be a great solution. You can request a checking account and a savings account and then apply for a car loan with them.
Bad Credit Car Loans are provided mainly by financial institutions and high risk lenders specialized in this kind of loans.
The interest rate charged for providing this type of loans is usually higher than regular loans but if you compare loan quotes you may find some interesting offers. Just make sure you credit report is not pulled too many times as this may lower your credit score. If you get declined, your credit report will also show this fact, so you might want to pull a copy of your credit report yourself and ask the lenders to pre-qualify you in order to avoid harmful records in your credit history.
Home Equity Loans as an Alternative Source of Finance
Though it may sound strange, you can get finance for purchasing a car with a home equity loan. If you cannot get a bad credit car loan and use the car as collateral you may be able to apply for a home equity loan using the equity you have build on your home as collateral. That way, you will be able to obtain a considerable amount of money at a good interest rate that you can use for the purchase of your new car.
They main advantage of this procedure is the fact that you can have really bad credit and still get approved since your house is guaranteeing the loan. You will also get a very competitive interest rate, much lower than the interest rate you would get with a bad credit car loan. And as a plus, the interest on home equity loans is deductible so you will save plenty on taxes.
As you can see, there is no need to despair if you have bad credit. There are always ways to obtain finance even if the usual methods fail. You just need to do your research and consider different options. The car of your dreams is just a few steps away.