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Credit Repair: Car Financing for Someone Who Has Bad Credit

Jun 5, 2008
If someone says you have bad credit,they mean you have a poor credit score. Generally people are given a poor credit score for having a bad credit record. This can be attributed to not paying on loans, home mortgages, bills, or services, or submitting these payments past their due date. To financial institutions, people with poor credit scores are considered high risk, and it can be very difficult for these people obtain a reasonable rate on a secured loan. A question that is often asked by "high risk" borrowers: Is it a smart idea to apply for a car loan if I have a bad credit rating?

Consider the Implications

Your poor credit score negatively effects you in may ways:

- Depending on the state of your credit, your loan request may be denied.

- If your application is accepted, the lender can still charge you a higher rate of interest.

- In considering the purchase of a car, the seller might not give you a good price, or may charge extra.

Even if a specialized lender gives approval to your application for bad credit car loan, this does not mean that you achieved the goal. You will have to repay the amount you have received as loan and also the rate of interest on it. A person with decent credit rating can acquire car finance at a low rate of interest of just 10% and the term of loan for him could be 7 years. On the other hand an individual with bad credit score can get car finance at a rate of interest ranging from 5% to 26%.

A person with bad credit will have 2 to 4 years as their loan term. Also, you may be required to offer 50% of the total loan amount as a down payment.

Find the Answer

After considering the implications of bad credit, it's easy to see that securing a car loan, if you have bad credit, is a bad idea. If you are considering the purchase of a new car and have bad credit, consider these questions: Am I able to pay the high interest rate for a "high risk" loan? Am I willing to sacrifice a large portion of my income to pay this loan each month?

Isn't there a way to find a decent car loan, even if I have bad credit? No. But there is a solution.

The ramifications of obtaining a loan for the purchase of a car, if you have bad credit, are great. It is best to avoid these types of loans and to focus on improving your credit score. Start handling your finances efficiently and make your payments on time.

Remember, it may take a few months to improve your credit score. Taking this into account, you can push back your wish of getting a new car. Be determined to turn your bad credit to good and you will see that it was worth waiting for a few months to get a new car.
About the Author
Thinking about using debt consolidation to pay off your credit card debt? There are some things you should know first. Visit Debtopedia.com to learn more about debt reduction & consolidation. Get a free copy of my special report at http://www.debtopedia.com
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