You find the car of your dreams, and the best part is, you can actually get a loan for it even though your credit is not so great. There's a flashing sign in front of the dealership that says so, and you couldn't be more excited to get your new car home. As tempting as it may be to accept an auto loan ins spite of your bad credit, it is best to take a moment, step away, and really examine what taking a bad-credit auto loan can mean. It is usually best if you repair your credit and then get an auto loan for a new vehicle. Here's a look at why that's the case.
1. Bad credit loans can mean higher payments.
Borrowing an auto loan with bad credit will often leave you with paying more per month back to the lender every month than what you would with better credit. Because of your poor credit history, lenders are limited with payment and loan terms they are able to offer.
2. Bad credit loans can mean shorter loan terms.
The lender may be providing you with an auto loan in spite of your bad credit, but they still see you as a risky borrower. Therefore, they will often keep the loan term short in an effort to get back as much money as they can as fast as possible.
3. Bad credit loans can mean higher interest rates.
A high-interest rate is something that really should be avoided when you buy a new car. When you are paying thousands for a new ride already, paying a whopping amount of interest on what you borrow is going to mean you will be paying more for that car in the long run. The value of a vehicle drops pretty rapidly even a new one, so paying more for it than what it's worth because you've tied up a lot of your payments in steep interest payments means you will never really recoup what you've paid.
Overall, it is a better idea to work with a credit repair service to bring up your credit score before you try to buy a new ride. Just upping your score a little bit can bring you out of the bad-credit zone to get you a fairer offer from an auto loan lender, so you get more affordable payments, lower interest, and the ride that you really want for a good price.
For more information, contact a company like optimal credit.