If you have bad credit you might wonder how you can get a guaranteed car loan. By following the information in this article you can learn how to get a guaranteed car loan even if you have a bankruptcy, bad credit or no credit.
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Credit Score
When a lender is deciding on whether to loan a borrower money, they look at the borrower’s credit score first. Basically a credit score is a build up of the borrower’s entire financial history. It shows the lender how responsible the borrower is with their financial responsibilities. If the credit score is low they will charge a higher interest rate. It’s important to know your credit score before you start researching lenders, you may be able to negotiate rates with the lender if you believe your credit score is better than the interest rate they are offering you.
Car Loans with Bad Credit Scores
Borrowers who have a bankruptcy or a bad credit score will end up having higher rates on any kind of loan or credit card. In most cases it isn’t a good idea for anyone to get a loan through a dealership, but this is especially true for borrowers with bad credit. There are a lot of things that the dealership will do to try and raise rates, so that they will get more money out of the borrower.
Many borrowers don’t know that they can get financing outside of the dealership. One option is to get financing online. You can even apply for a loan before car shopping and get pre-approved. Knowing how much you are approved for before hand can make your car shopping experience easier. Rates will still not be as low as a borrower that has a good credit score, but it will be a significant drop compared to what the dealer would offer, and you can make the interest rate even lower by making a larger down payment. In about a year you can re-check your credit score and if it’s improved then you can refinance your loan for even better rates.
If you have bad credit, try applying here with CarsDirect, a specialist in Bad Credit Car Loans.
Higher Down Payments
Making a higher down payment is a good idea for anybody buying a car. But for someone with bad credit, making a higher down payment can lower your rates. By making a higher down payment the borrower shows the lender that they are serious about paying the entirety of the loan. Not only does it show the intent of complete repayment, but it decreases the length of the loan which saves the borrower money in interest.
Another good way for anyone to save money on a loan is to make higher payments than requested. Making the lease shorter will cut down the amount of interest the borrower accrues.
Lower Interest Rates with a Co-Signer
If you have a friend or family member with good credit, they may be willing to co-sign for you. If you do find a co-signer like this then your interest rates will decrease even further. Some people may be hesitant to do this because, effectively, a co-signer states that they will pay for the car if the borrower defaults. That is the same reason a lender will give a borrower better rates. A co-signer gives a lender insurance for getting their money back.
See what kind of interest rates you can get >>
A guarantee loan will require less of the co-signer, so that may be something a borrower will consider before placing so much responsibility on themselves and their co-signer.
Collateral Loans
Another way to lower interest rates is to get a collateral loan. If a borrower has bad credit, but owns significant assets, like a house, they can get good interest rates on their loan. Through a secured loan a borrower can offer an asset as security to the lender. This means that if the borrower does not repay the loan, the lender has property rights to the asset the borrower offers. With this insurance, the lender can feel free to give the borrower interest rates that would be lower or the same as a person with good credit.
For a collateral loan a borrower doesn’t always have to use an asset. They can also use the car as collateral. If the borrower doesn’t re pay the loan, then the lender can take the car and sell the car to make up some of the loan.
