Auto and trucks

 by: Carrie Reeder

Much like the bad credit home loan market, the bad credit automobile loan market is a crowded and competitive arena. If you find yourself in the position of needing a bad credit automobile loan use caution in selecting your lender. While most lenders dealing in the bad credit car loan sector are honest, there are those who skirt the law with predatory loan practices. Knowledge is the best defense against these dishonest loan agents. Know more about your own credit than the lenders do. Arm yourself with a recent credit report and FICO score. If a lender says he has different information about your credit than you do, ask him for his sources. If at all possible deal with a financial institution where you already have a banking relationship. Many banks and credit unions will help you apply for "second chance" programs. They know that when they help their customers in the short run they will retain the business of those customers in the long run.

Be Careful With Who You Apply With - Be extremely cautious when responding to any solicitations from bad credit lenders no matter how those solicitations are received. Do not give any sensitive personal information to a lender until you have checked the company out with the Better Business Bureau. The best course of action is to initiate contact with a lender yourself from a list you have compiled through the Better Business Bureau and personal references. Don’t be embarrassed by the fact that you are having to inquire about a bad credit automobile loan. Many lenders make more money off of their bad credit customers than off of their more credit worthy customers.

Find out the current interest rates - Interest rates fluctuate from day to day, so check them often. Depending upon the state of your credit you can expect to pay from as little as 2% above the average rate to as much as 17% above the average rate. Rates above this are in many cases illegal. Watch out for lenders who charge the legal rates but tack on an assortment of finance charges and prepayment penalties.

Research The Price of Your Car - When you have narrowed down your car choices, research the value of the different models. The price of a car being financed with a bad credit loan may be a little higher than the same car for a good credit loan, however, the difference should only be a few hundred dollars not a few thousand dollars. You can become trapped in loan if the dealer inflates the price to the point where the car is financed for more than it is worth. Just as you will shop for your car, shop for your lender and let all of them know that you are talking with more than one company. If you think a lender can do better, state your case and ask for different terms.

Any reputable lender will put its proposals in writing with all the blanks filled in. Further, you should always be allowed ample time to read all of the loan documents. Walk away from any lender who pushes you to sign something that you haven’t had time to read. There are compromises you will have to make because you need to obtain a bad credit auto loan. These compromises don’t include being taken advantage of by a predatory lender. A bad credit auto loan should be a stepping stone to reestablishing your credit not a trap that may result in additional credit difficulties.