3 Things To Know About Car Financing With Bad CreditBy BenOni | March 2, 2023
If you’re looking to finance a car with bad credit, there are a few things you should know. Here are three things to keep in mind when you’re car shopping with bad credit.
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You May Have to Pay a Higher Interest Rate
If you have bad credit, you may have to pay a higher interest rate when you finance a car. This is because lenders see you as a higher risk borrower. To offset this risk, they may charge you a higher interest rate.
You May Have to Make a Larger Down Payment
When you finance a car with bad credit, you may also have to make a larger down payment. This is because lenders want to make sure you have some skin in the game. By making a larger down payment, you’re less likely to default on the loan.
You May Have to Finance Through a Subprime Lender
If you have bad credit, you may have to finance your car through a subprime lender. These are lenders that specialize in loans for people with bad credit. While you may have to pay a higher interest rate with a subprime lender, they may be more willing to work with you.
If you’re looking to finance a car with bad credit, keep these three things in mind. By understanding the process, you can make the best decision for your situation.
You might not be approved for a traditional car loan
Bad credit can make it difficult to get approved for a traditional car loan from a bank or credit union. But that doesn’t mean you can’t get financing. There are plenty of lenders that work with borrowers with bad credit, including some auto dealerships.
You’ll likely pay a higher interest rate
Interest rates on car loans are generally determined by your credit score. The lower your score, the higher the interest rate you’ll pay. That means you’ll end up paying more for your car over the life of the loan.
You might need a cosigner
If you have bad credit, you might need a cosigner to get approved for a car loan. A cosigner is someone who agrees to sign the loan with you and is responsible for making the payments if you can’t.
Getting a car loan with bad credit is possible, but it’s not always easy. You might have to shop around to find a lender that’s willing to work with you. And you can expect to pay a higher interest rate than you would if you had good credit.