If you go shopping for a product using the wrong criteria, you’ll be unhappy with the result. Buying a car based on how comfortable the seats are while ignoring fuel efficiency and reliability will cost you over the long run. The same thing is true if you shop for a bad credit car loan, basing your decision on the wrong factors. What should you look for in a bad credit card loan?
Interest Rates
The biggest factor in the cost of the car loan is the interest rate. An interest rate that is one percent higher will add several thousand dollars to the total you pay for the car. You cannot assume that because you have bad credit that you have to pay an insane interest rate. Determine which lenders will consider manual underwriting so that you qualify for a better interest rate if you’ve been cleaning up your credit. Determine which lenders won’t charge an incredibly high interest rate for someone with bad credit. Visit his Kichener website for bad credit car loans. Note that you don’t want to use a low interest rate as an excuse to buy a more expensive vehicle because it now feels like you can afford it.
Administrative Fees
Administrative fees can add up, especially if they roll that cost into the loan because you cannot pay it upfront. Be careful with fees like delivery fees, closing costs, and so forth. Some car dealers will add fees to the list that you really shouldn’t have to pay. Take the time to ask whether or not you can reduce the administrative fees, but don’t let them offset it by jacking up the interest rate. For example, perhaps you could save on the fees to run your credit if you bring a copy of your credit report.
Loan Term
There are two ways to look at the car purchase. One is based on the monthly payments. The other is based on the total amount you pay for the car over the life of the loan. Be careful not to get a six or eight year loan so that it feels like you can afford the car because the payments seem low. Instead, look for a three to five year car loan. This allows you some flexibility. You could lower the payment by extending the loan by 12 to 24 months but you won’t end up doubling the cost of the car by having a very long loan term.
Terms Tied to the Loan
While the interest rates and fees matter, so to do the loan terms. For example, you don’t want to pay a penalty for pre-paying the principle on the car loan. Nor will you want to be hit with hefty fees if you are a day late with the car payment. Be cautious with a car financing deal that requires you to trade-in the current car toward the purchase of a new or newer vehicle from them. They may give you a good interest rate or upfront fees on the loan because they’re giving you a fraction of what the current vehicle is worth. Remember that you could save money by selling a working used vehicle yourself and using that cash as a down payment on your new car. Avoid lenders who have a history of telling you the trade-in is worth just enough to qualify for your new down payment.
Know what factors matter most when shopping for a bad credit car loan. Then you’ll be able to decide
between lenders based on the right criteria.
