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Car Loan Interest Rates For Bad Credit Customers

Author: Charles Martin  //  Category: Car Insurance

You will find many a times that there is hardly any compatibility between bad credit and the interest rates on the car loan. To finance the purchase of a vehicle with a FICO score below the level of 500 will give you a very hard time. With such a low score all that you can get is a car loan with a high interest rate.

Collateral in Some Form

When the interest rates are high, you will be paying more than the actual cost of the car in the end. While refinancing a car a number of important things need to be looked into and understood, especially when the credit scores are not so good. Payouts to be made per month are higher in case your credit score is poor or bad. Just as you would avail a bank loan in the same way, car financing can be obtained by holders of bad credit status.

Besides high interest rate the down payments to be made monthly are also very high. To secure the car loan the lender will need collateral in some form which should not be more than the car’s actual cost. Very often the very same car you intend purchasing is offered as collateral or security against the loan.

Set Aside a Good Amount for Down Payment

Lenders own the right to sell off the car in case you default the car loan payment. On the car sale they could either profit or suffer some losses due to depreciation costs. It is for this reason the down payments to be made are higher, by the holders of bad credit. At times the down payment could go up to half the car value. Good credit holders may have to pay just about 20% as the down payment.

Before availing the loan it is best to set aside a good amount to pay as down payment by individuals not having very good credit scores. Besides this, also get to know more on your credit history. Depending on this, the expectations from lenders can be determined. To make the loan more manageable you can also negotiate to get an affordable rate.

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