You may experience tough financial times that may make you unable to pay back your loans or bills. As a result, your FICO score may fall below the recommended 620. If you have less than perfect credit but want to buy a car, getting auto refinance loans will not be easy. The mainstream lenders are likely to have terms that will lock you out of financing. Your option can be to apply for bad credit car loans.
Bad credit auto loans are offered by subprime lenders to borrowers with no or poor credit past. The loans are meant to help borrowers purchase the cars they want or pay off existing car loans. One characteristic of the loans is that they come at high interest rates. Auto refinance loans for prime loans cost less interest than those for comparable amounts of bad credit loans. Therefore, while you may be approved for financing by a subprime lender, you should expect to pay a higher interest than someone financed by a mainstream lender.
Your credit score usually determines how much interest you will be charged for auto refinance loans. Most bad credit car loans come with over 10 percent interest rate. Some lenders can reduce the interest charged if you opt to provide collateral. This is usually an asset that acts as security for the loan. If you fail to pay back the car loan, the lender has a right to sell off the collateral to recover the amount you owe plus interest. Most lenders accept land title deeds are collateral for financing. Other lenders accept car titles.
Get Pre-qualified For Vehicle Financing Online
Before you start shopping for a car, it is advisable to get pre-qualified for auto refinance loans. When you have a lender who is ready to finance you, the car purchase process can be done faster. The typical buyer usually finds a car and then starts looking for financing. In this case, the dealer will submit an application for the buyer through another lender. The disadvantage of having your car loan application submitted by a lender is that you will pay a higher interest rate. Most lenders approve applications made by car dealers since the loan is secured by the car. However, the dealer will increase the interest charged to cater for administrative costs and get a cut from the transaction.
Applying for auto refinance loans by yourself before you start looking for a car will save you from paying the commissions that dealers usually include in their financing. The cost of the loan will depend on your income and other costs. When you get pre-qualified for vehicle financing, you will find it easy to get a car that will fit your budget. Moreover, you will have an upper hand when bargaining the price of the car since you will be sure of the amount that you have.
If you have a bad credit history, your best chance of getting financing lies with a lending company that offers auto loans for people with bad credit. You should also work to improve your credit score before you apply for auto refinance loans.