Do Your Need to Look for Bad Credit Car Loans? |
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If you have bad credit, getting a car loan can seem almost impossible. Fortunately, there are ways for those with bad credit scores to get money for a new vehicle. These bad credit car loans may require some sacrifice on the part of the consumer and more persistent to get the loan you need. Getting a loan with bad credit can and cost you thousands more than the same loan what if you had good credit. These bad credit car loans often have very high interest rates and require you to put down a hefty down payment -- sometimes up to 50% or more. If you currently have transportation and can wait on a bad credit car loan, it is better to do so and see if you can somehow raise your FICO scores before you sign on the dotted line. According to the Fair Isaac (the company responsible for FICO scoring) website, there is currently an 8% difference between auto loan interest rates for those with the lowest FICO scores -- who would need bad credit car loans -- and those with the highest FICO scores. For example, by crossing the line from a FICO score of 619 to a FICO score of 620, you can go from 14.48% on your auto loan interest rate (i.e the rate of bad credit car loans) to a little over 11%. Over time, that can add up to a significant savings. The 'auto-enhanced' FICO scores, that are used by the auto industry when handing out loans, weighs installment accounts on your credit report more heavily than it does in your 'classic' FICO scores -- although revolving accounts will still have the most effect. So, you should be able to decipher whether your 'auto-enhanced' score will be worse, better, or just about even with the 'classic' FICO score by the performance of your installment accounts -- whether they are in good standing or have any delinquent or does derogatory notations associated with them. This should give you a good idea of whether you are a candidate for a bad credit car loans. Although the auto industry does not use the 'classic' FICO scores that are given to consumers, you will have a good idea of what your FICO scores will be, if you are teetering on the edge between two interest rates, or if you are most likely to be approved for bad credit car loans. This will allow you to take the steps necessary to try for a better interest rate, before you apply and settle for a bad credit car loan. The best thing to do is to find out what the current rates are for bad credit car loans (i.e. financing for those with a score under 620), so that you will have a good idea of when to stop and take the interest rate that you are offered. Remember, while you don't want a needlessly shop around for a lower interest rate and rack up credit inquiries, you also don't want to give up too soon and take a bad credit car loan that will needlessly cost you thousands of extra dollars in the long run. |
