Basic Car Loan Tips For People With Bad Credit
by JOHANNE CLIMACO
It is a common story for people with bad credit: the sad story of having to put up with ridiculously high interest rates. A borrower with a bad credit score gives the lender an impression of unreliability. Thus, to compensate for the risk of incurring a bad debt expense, the lender issues a higher interest rate. In a sense, a higher interest rate is somewhat like a minor punishment for slacking off on one��s payment obligations.
Car loans follow the same rule. People with bad credit will no doubt get a higher interest rate. Unfortunately, when it comes to car loans, many people with low credit scores end up with deals that have much higher interest rates than what should have been required.
Often, this is due to borrowers�� lack of awareness of the business. Most go to the dealer unprepared, asking what car loans they could apply for without a clue of what the current rates are on different car loans. Even worse, they don��t even know their own credit scores. As a result, they end up taking the dealer��s offers as ��gospel truth��. With the borrower in such a vulnerable position, some sales representatives in some dealers may simply take advantage of the borrower.
Dealer scams commonly try to convince the borrower into thinking that whatever car loan is being offered by the dealer (which the dealer got with high interest rates) is the only one available to the borrower. Through convincing sales pitches, a borrower would foolishly feel indebted to the dealer for doing him or her a favor by diligently working out a car loan despite the borrower��s less-than-ideal credit score. But in truth, some of these dealers simply exploit the borrower��s lack of self-esteem for having a low credit score.
In addition, some dealers may also trick borrowers into thinking that the loan offer requires auto warranty, insurance and all the other extras, thereby beefing up the annual percentage rate (APR). However, the truth is, the borrower can get all these extras after securing the auto loan. Doing so allows the borrower to keep the APR at a minimum.
To avoid any scams, borrowers must do their homework. One of the best and most convenient ways for finding car loans would be to search online. There are online services that provide access to different car loan offers with very competitive rates.
Borrowers can therefore check in advance which car loan offers they could possibly qualify for. Moreover, some online services provide direct links to lenders, allowing borrowers to avoid the markups associated with acquiring loans through dealers.
In addition, some of the online services also provide other offers for insurance and auto warranty that one can sign up for separately from the car loan to ensure the lowest possible APR.
