Thursday 15 November 2012

Bad credit auto loan helps re-establish and improve your credit history


A bad credit auto loan is meant for those with poor credit and who are not eligible for regular auto loans. Earlier, bad credit carried a stigma and no one was willing to extend any loans whatsoever to such people. But, the recession has made bad credit unavoidable in hitherto unimpeachable cases also and it no longer carries a totally unsavoury reputation. Although those with bad credit are still handled more strictly than those with a good credit history, nevertheless, it is no longer difficult to avail of loans because of bad credit. The lenders also have realized the vast potential of auto loan seekers because a vehicle is a must to carry out day to day activities and most people want a vehicle even if it has to be taken on a loan.
Bad credit auto finance loan attracts a very high rate of interest, much more than the regular one. It therefore makes sense to improve your credit rating if you are stuck with a bad one before you apply for car loan. Lenders are wary of loaning money to those with bad credit and hence they like to extract their pound of flesh by asking for exorbitant rates of interest. The higher returns are their way of compensation for granting loans on bad credit. They also may ask for a larger than normal down payment which is their way of securing themselves against potential non-payment. However, in this case, a large down payment actually works out in favour of you because it leaves with you less monthly repayments.
Many banks, financial institutions specialize in these types of loans and there also loan brokers who help get you the car loan with bad credit. Loan brokers offering loans on bad credit are of two kinds. They are hard money lenders and subprime lenders. Subprime lenders do not charge an excessively high amount of rate of interest although the rates are higher than that of loans on good credit. The hard money lenders, on the other hand, charge very high rates of interest because primarily they do not require much information from you to give you the loan. Hence, they charge unusually high interest rates for their lenient outlook towards gathering the relevant information from loan seekers.
If your credit history is not flawless, do not berate yourself and resign yourself to ‘no loan, no car’ aspect. Bad credit auto loan is there exactly for such situations and you can fund your car as well as re-establish your credit history with this loan.

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