Bad credit can be next to impossible to correct when you need to buy something to correct it. Yet, because of that very bad credit auto financing and other credit-based purchases are frustratingly difficult to achieve. However, auto financing despite a lousy credit report is a lot easier than you might think.
If you have time to regain your good credit standing before looking into auto loans, one way to do this is to obtain a secured credit card. This type of financial relationship is an easy way to build good credit; you deposit money into a savings account as collateral, then charge items against the account using the credit card. In repaying your monthly credit card bill on time, you can rebuild good credit over a period of months (or years, depending on the damage you are seeking to repair).
If waiting for a year or two to buy a car is not an option for you at this time, there are other methods of bad credit auto financing available. Aside from being flat-out turned down, what an individual with bad credit risks most of all in obtaining an auto loan is high interest rates. These rates are for obvious reasons not prominently advertised; therefore, as with all major transactions, read the fine print. Many people already mired in bad debt get trapped into financing themselves into food stamps or worse through the finely printed, legally worded, financial jargon floating around in their finance agreement. If at all possible, have an attorney look over and explain any and all bad credit auto financing agreements or contracts before you sign. If you don’t have an attorney at your disposal, keep in mind that what sounds like a decent interest rate right now (think of it as the lending organization’s reward for giving you the money in the first place) may jump to an exorbitant amount after a few months have elapsed. The average auto loan currently being 58 months – nearly five years – long, ensuring long-term stability in an interest rate will ease your financial pain down the road.
Some lenders, rather than slapping a less-than-desirable loan candidate with a high interest rate and leaving it at that, choose to enlist the services of an intermediary company. This second institution or business, generally one that specializes in working with individuals with shaky credit ratings, serves the actual lender as a buffer; should you be unable to make payments or should any other financial crisis arise in the bad credit auto financing process, the intermediary company takes care of the problem on your end while making sure the lending institution still gets their money back in full. This makes the first institution feel a lot more secure about giving people with bad credit auto financing.
