Don’t let anyone tell you that you can’t secure any car loans with bad credit. There are tons of loans out there, but you have to find the right one for your situation. There are several financing options available to you when it’s time to buy a car. These options each come with their own ups and downs, or pros and cons, as many like to call them. It’s a good idea not to be in a situation with bad credit, but life happens, and you still need a car. Thankfully, there are loans available to you.
Can You Secure a New Car Loan?
Typically, new car loans are among the most flexible. Because a new vehicle has the most value at the time of purchase, dealers and their financing departments have the most flexibility when offering a new car to a customer. Many new cars also have rebates or discounts that can be shown on the loan documentation as a down payment, which can help you secure the loan when you have bad credit.
Because of your credit situation, a new car loan that’s advertised to have extremely low-interest rates won’t be available to you. Instead, you’ll need to think about the money you’ll put down toward the vehicle and the overall payments with the approved interest rate. New car loans are often offered for a period of three to five years. If you can afford to put 20 percent of the vehicle price toward a down payment, the new car loan you secure with bad credit could have a more favorable interest rate.
Should You Secure a Used Car Loan?
The initial price for a used car will be much lower, normally, than a new vehicle. This is one of the main reasons why the used car market is where many people shop. You can find loans for certified pre-owned vehicles, lease returns, and regular used cars. The certified pre-owned models typically offer a powertrain warranty to give you some peace of mind when buying a used vehicle. Other used cars normally don’t have a warranty beyond 30 days or 300 miles, which is enough to give you an idea of whether or not the car is right for you.
You can secure used car loans through various financing institutions, and many are offered for people with bad credit. When you purchase a used vehicle and want to secure one of the car loans with bad credit, it’s expected that you pay a large down payment. Used vehicles do not come with any rebates or discounts that can be shown as a down payment for the vehicle. Usually, the best interest rates for used vehicles can be found at banks and credit unions.
Can You Secure an Auto Refinance Loan?
An auto refinance loan is used to replace an existing loan. Most shoppers will only do this if they want a longer loan term or a lower interest rate. This is something you can’t typically process when you have a bad credit score. How could you get an auto refinance loan? Typically, the answer will be that you cannot secure this type of loan while you have a bad credit score, but there’s something that could change going forward.
If you buy a car while your credit score is low, but you work hard to improve your score during that loan, you might consider an auto refinance loan. If your current credit score is significantly higher than it was when you first purchased your vehicle, it could be time to refinance for a lower interest rate. That lower rate could mean saving thousands of dollars every year.
Is a Cash-Out Auto Loan a Good Idea?
Many times, you hear about people refinancing their homes to take out some of the cash equity for other projects, vacations, or unanticipated expenses. It’s not often that you hear about the same being done with a car loan. There are some cash-out refinance loans available, but they come with higher interest rates and longer terms. Cars don’t normally have the same value as homes, and cash-out loans should only be explored as a last resort.
Could You Secure a Private Party Auto Loan?
Whether or not you can receive one of the private party car loans with bad credit has to do with the type of car and your relationship with that private party. These loans are taken out at banks, credit unions, and through online lenders. Securing one of these auto loans can be extremely beneficial to you because they often come with the lowest interest rates that you’ll find. Unfortunately, these loans also come with limitations. Normally, you must purchase a car that’s less than ten years old that has under 150,000 miles on the odometer.
Do You Think You can Get a Lease Buyout Loan?
Are you leasing a car but during that lease term, your credit has gone from good to bad? Usually, leases aren’t offered to customers with bad credit, but sometimes they are. Regardless, if you want to purchase the vehicle you’re leasing, but your credit isn’t very good, you might be out of luck. The company that secured the lease with you could offer you a loan to buy the vehicle but might not if your credit score has declined during the lease period.
Which Car Loan Will You Choose?
Now you know a little bit more about car loans and the different types offered. The most common for any consumer are new car and used car loans. Usually, if you’re looking for a way to secure car loans with bad credit, the new car and used car loans are the easiest to work with and can be secured with a down payment. There are several options; make sure you understand what type of loan you need, how much you’re willing to put toward that vehicle, and how much your payments will be when you make them each month.
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