Lenders don’t like taking risks. Because of this, many people believe that having a low credit score is a financial disaster. Although having a bad credit score can make getting a car loan difficult, bad credit car loans do exist. It’s much easier to find a loan with poor credit now than it has been in the past. Finding lenders that provide bad credit car loans is plausible for those who need a car but cannot receive a traditional loan.
Causes of Bad Credit:
Payment history is the biggest component of your credit score. If you don’t pay your bills on time, it can dramatically decrease your credit score.
Defaulting on payments
Credit card bills that aren’t paid will eventually lead to a bad credit score.
A charge off account
When a creditor gives up trying to collect a debt you owe to them, the account is considered “charged off.” These accounts hurt your credit score.
Filing for bankruptcy
Filing for bankruptcy is one of the most detrimental things to a credit score.
If you have any unpaid judgments against you, they can negatively impact your credit score.
Traditional Bank Loans
Traditional bank loans are loaned directly through the bank (as opposed to being loaned through a dealership). This is one of the most popular types of auto loans, but they can be challenging to obtain with less than great credit. The bank requires that over a certain period you must pay, in addition to the amount loaned, a finance charge. Once you enter a contract with the dealership you are purchasing from, you use the loan from the bank to pay for the vehicle. However, with these kinds of loans you may be given very little flexibility on any payment due dates. In addition to limited flexibility, with bad credit your down payment and interest rate may be very high. It is even possible that the bank chooses to deny your request for a loan altogether. A traditional loan is usually for those who have excellent credit scores but is not ideal for a bad credit car loan.
Credit Union Loans
Credit union loans are very similar to traditional bank loans and are among the most competitive loans available. Much like banks, they offer a variety of loan accounts to choose from; but access to these is usually reserved for those with great credit scores. However, credit unions differ from banks in their size. Credit unions are typically much smaller and more local, thus limiting availability and accessibility. Their membership is restricted by certain groups of affiliated people based on where a person works or attends school.
Buy Here Pay Here Car Loans
Buy here pay here dealerships are different than traditional dealerships. The difference lies primarily in the fact that they provide their own in-house financing. This means they can offer easier credit approval for people who can’t qualify for traditional bank or finance company loans based on their credit history (or lack thereof). For someone who doesn’t have excellent credit and is looking for a bad credit car loan, buy here pay here dealerships may be the better option. In fact, certain buy here pay here dealerships may even be in the business of helping you improve your bad credit through a bad credit car loan.
Finding the right car loan can be tricky, but when you purchase a car from J.D. Byrider we will work with you to find a loan that will fit your budget, no matter what your credit score is.
Top Reasons Why You’ll Be Rejected For a Car Loan (n.d.). http://www.realcartips.com/carloans/219-reasons-not-qualify-for-car-loan.shtml
Credit Union Loans (2017, March 1) https://www.thebalance.com/credit-union-loans-315401