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A Car Loan For People With Bad
Credit
by: Peter Garant
Most banks have strict policies about whom they will lend their money
to and for what the money will be used. They will not grant you a car loan
for a used car which is older than five years. They charge higher interest
rates on loans for used cars than on loans for new cars. And very rarely
do they grant loans to people who fall under the “subprime” category.
A person who is considered a subprime borrower is one who has a
blemished credit history. He may not be paying his bills on time or he may
overextend his credit card. A subprime borrower is usually someone who has
a credit score below 620. If your loan application has been rejected on
the grounds that you belong to this credit-unworthy group, does this mean
that you cannot borrow anymore?
You may still get a car loan if you will look for lenders that grant
financing to subprime borrowers. Avoid finance companies that advertise
“1.9% interest**”. Notice the sign (**)? Below the big ads, written in
fine print, the ** means for prime borrowers only or for people with
excellent credit. Clearly you do not belong to this worthy group. People
with bad credit will have less privileges when getting a car loan. The
interest rates are decidedly high. You may opt to search for online
lenders. But there are measures you may take to improve your
circumstances.
The first thing to avoid is to rely completely on the car dealer. He
will always get a certain percentage out of car loan transactions. In
fact, it will be advisable if you are able to secure a car loan before you
allow a car dealer to be within a shouting distance from you. When you
look for a credit grantor, don’t accept the first one you encounter.
Compare interest rates offered by lenders, but don’t accept the average
rates they give. A lender may offer a lower interest rate for a person
with a credit score of 800 and a higher interest rate for someone with a
score of 600. Ask for specific rates. You may also approach credit unions
and banks where you have a current account.
You also have a chance to improve your “category” by checking your
credit report and reforming your credit score. For example, there might be
an error in the information found in your credit report. This error may
have been the one responsible for the black mark on your credit history.
You must immediately have this error corrected by informing the credit
bureau in writing.
Credit scores can change. If you pay your bills on time and if you
always stay within your budget, then your credit score will likely
improve. Once you have a higher number, you may get a lower-rate
refinancing for your car loan.
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