Credit Finance

Saturday, March 20, 2010

Auto Loans - Bad Credit Finance

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Commercials and advertisements are everywhere that says that anyone can get a car regardless of how bad their credit is. Usually this is true, almost anyone can get a car loan but the terms of the loan can often make you find yourself in a rut that you didn't anticipate.

Besides the fact that you will likely need a much larger down payment in addition to a higher interest rate, your auto loan will very much resemble a traditional loan.

The down payment required can often be as much as half and the interest rates can be as high as 26%. This is dependent on which state you live in and exactly how bad your credit really is.

Even with bad credit a person should never accept an interest rate that is more than about 18%. Another difference between those with good credit and those without is that people with good credit can often finance for as many as seven years.

Those with bad credit will usually have to accept much shorter finance option such as two to four years.

If a person is given a chance to finance an auto with bad credit it is very important that the payments are made on time. This means that you will be establishing a good line of credit and the next time that you want a vehicle you will be offered better terms.

Unfortunately those with bad credit are often at the mercy of the lender and fall prey to some unsavory conditions. Lenders know this and some, especially those that deal in offering bad credit auto loans, have been known to abuse the system.

Mainly this is done by artificially inflating the price of the car and the interest rate too. An example of this would be for a lender to take a $4000 car and inflate the cost to lenders as an $8000 car.

They would accept a $2000 down payment and finance the rest at as much as 26% interest. This forces the buyer to pay often as much as three times the price that they would pay for a car under normal conditions.

To protect yourself you must be armed with knowledge. Another thing for a buyer with bad credit to consider is that many times it is in the buyer's best interest to go for the gold and try to buy a new car rather than a used one.

Believe it or not, it may be easier for two reasons. One, there are better incentives offered by the manufacturers and secondly because the dealers are pressured to dump new cars all the time.

Use this information as part of your knowledge base so you always get the best auto financing, bad credit or not!

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Chimezirim Odimba is a finance expert.

Article Source: http://EzineArticles.com/?expert=Chimezirim_Chinecherem_Odimba

Labels: bad credit finance, credit finance, credit finance loans