Bad Credit Car Loan Options
If you have bad credit, you can still buy a new vehicle. Here are a few of your loan options when you're ready to purchase a new car.
Dealership Financing
You might be able to find a dealership that will work with you to make buying a car with bad credit possible. However, if you are so fortunate to find such a dealer, you will more than likely pay a steep price for the convenience of borrowing. Dealership financing tends to be overpriced even for those with good credit, so if you have credit challenges, your interest rates will be even further inflated. If you are buying a car with bad credit at a dealership, the dealer is likely to require a massive down payment or charge you sky-high interest rates. You are usually better off with third-party financing when buying a car with bad credit.
Home Equity Loan
If you are a homeowner buying a car with bad credit, you might consider a home equity loan to finance the purchase of your new vehicle. Because home equity loans are secured against your home, you may be able to qualify for more favorable rates than you otherwise would. To do so, you must have enough equity in your home to finance your new vehicle. Typically, home equity loans can offer some of the lowest interest rates, but there are risks. If you are buying a car with bad credit with a home equity loan, you could lose your home if you fall behind on payments. For many buyers, a new car is not worth this risk.
Third-Party Financing
If you are buying a car with bad credit, your best bet (and the least risky) is probably third-party financing through an independent lender. Third-party financing basically refers to financing for your vehicle that is not provided by the dealership. The lenders with whom we can match you can all provide independent financing. Whether you are buying a car with bad credit or perfect credit, third-party financing can usually offer the best deals because you don't have the dealer middle-man inflating your rates. When you finance through the dealership, you are paying for both the dealer and the lender to make a profit. If you cut out the dealer, you can save substantially.
Time
When buying a car with bad credit, the best advice in some situations is simply to wait. If you spend a few months diligently working on improving your credit, you would be surprised how many doors you can open in terms of lending options. Taking time to improve your score can help you qualify for more loans with better rates and terms. So, if you can afford to wait for your new car a couple extra months, you might save yourself a lot of money by taking some time to work on your credit before buying a car with bad credit. If you have any questions, please visit our FAQ page.
