Auto Loans for People with Poor Credit – Do You Need One?
There is no denying that transportation is an absolute necessity in most circumstances, but securing an auto loan can be very tough for an individual plagued with credit problems and a poor beacon score. Many people find themselves in an incredibly difficult situation when shopping for a vehicle and there is no immediate fix to a negative credit rating. Although there are many lenders that have designed auto loans for people with poor credit, there are some important things to realize about these offers.
The down payment required with a poor credit auto loan may be significantly higher, so shoppers should be prepared to raise more money if needed. A larger down payment not only decreases the lender’s risk, but it also lowers the amount financed which results in lower and more manageable payments. A large down payment may be the only way that an individual can qualify for an auto loan.
There are typically higher interest rates associated with no credit check auto loans with repo. As a result, a higher percentage of the payment will actually go towards the interest rather than the principal of the loan. It is often recommended that a borrower pay a little extra each month if at all possible to decrease the total finance charges over the life of the loan. Higher interest rates are largely dependent upon the amount of increased risk that a lender may face due to a poor credit borrower.
It is also important to note that almost all poor credit auto loans will require a consumer to maintain both comprehensive and collision coverage on the vehicle financed. Auto loans for people with poor credit also typically mandate that the deductible on the auto insurance is no higher than $500, so this can raise premiums as well. A lender simply wants to ensure that they will receive their money if the car is involved in any accident or loss.
Many individuals find that there is no viable alternative to owning a vehicle, but luckily there are options available for financing a car with poor credit. The ability to drive to and from work may be taken for granted by many consumers, but it is a privilege that should not be taken lightly. Responsible payment activity on an auto loan for people with poor credit will actually increase a borrower’s beacon score, and perhaps the next loan will have even more favorable terms.