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February 5 2009
5:44 pm
Cheap Car Loans
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Bankruptcy? Repossession? How to Get a Car Loan with Poor Credit

Tip! The long-term cost of a car lease is always more than the cost of a car loan, assuming the buyer keeps the vehicle. If a buyer keeps his vehicle after the car loan has been paid off and drives it for many more years, the cost is spread over a longer term.

While having bad credit does not make it impossible to obtain a loan, you can expect to pay higher rates on home loans, vehicles loans, credit cards, and so forth. Each year, millions of people file bankruptcy. Furthermore, many lenders are forced to repossess automobiles because of non-payment. If you fall into this category, there are still ways to get approved for a new car loan.

bRebuild Credit Before Applying for Car Loan/b

Several creditors are willing to give loans to people one day following a bankruptcy. Of course, these loans do not come with the best financing package. Because the applicant is considered a high risk, lenders are likely to charge huge fees. This way, if the applicant defaults on the automobile loan, the lender has an opportunity to re-coup some of their money.

Before applying for a car loan, endeavor to rebuild your credit. Financial experts recommend that you obtain three to four new credit accounts. As a high risk applicant, lenders will be reluctant. Thus, you may have to obtain a secured credit card with a high percentage. If you pay off the balance on credit cards monthly, you will not be subjected to huge fees. Moreover, this is the easiest and quickest way to re-establish credit.

Tip! Get Financed To Re-establish Your Credit - Getting a new car loan can help you re-establish your credit when you make your payments on time. Once you have made payments on time for about 6 months or longer, you should be able to refinance your car at a much lower rate.

bWait 1 - 2 Years Before Applying for Auto Loan/b

After you have opened new credit accounts, periodically monitor your credit report. If you continue to pay bills on time, you will establish a good payment history with your new creditors. This will reflect on your credit report. Once you have been making regular payments on new accounts, try applying for a car loan. Lenders will notice your improved credit history, and may offer a financing package with better rates.

bApply for Loan with High Risk Lenders/b

Another method for obtaining a loan with poor credit is applying with a high risk lender. Commonly referred to as sub prime lenders, high risk lenders specialize in loan packages for individuals with poor credit.

Tip! Explore the market and shop around to get a low cost car loan. Seek advice from banks, car dealerships and lending institutions.

The downside is that most sub prime auto loans carry a huge interest rate. Typical car rates for good credit are about 5%. Bad credit applicants can expect to pay a few percentage points higher. On the other hand, if you do obtain an auto loan with a high percentage, you can always refinance the loan for a lower rate when your credit score improves.

Here are our recommended a target=_blank target=_new href=http://www.abcloanguide.com/autoloans.shtmlAuto Finance Companies/a online.

Carrie Reeder is the owner of a target=_blank target=_new href=http://www.abcloanguide.com/ABC Loan Guide/a, an informational website about various types of loans.

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