Landing an auto loan when you have bad credit is great news. Not only do you get the money you need for your car, but you also get a chance to improve your credit long-term. Auto loans for people with bad credit can be somewhat different than those issued to people with better credit, though. The differences reflect the higher risk and greater caution associated with borrowing with bad credit.
Higher Interest Rates
Chances are your interest rate will be much higher. This shouldn't be surprising as interest rates are often used as a reward or penalty for current credit status. You do not want to get a loan that has astronomical interest rates as you'd have a tough time paying down the loan, but do not be surprised to see a couple of extra points. It does pay to shop around and negotiate a bit if at all possible to try to get a better rate, though you might not find that much of a break available.
Your loan may be through a third party rather than the bank or auto dealer. Many banks and auto dealers issue auto loans themselves, but for bad credit, they often turn to third-party entities to provide the money. Be sure you know who exactly has ownership of your loan and the lien on the car because this can sometimes be confusing when going with a third party.
Higher Down Payment
You may be required to provide a bigger down payment. This lessens the risk for the lender and shows that you are more serious about paying off the car (you're less likely to disappear and get even more bad marks on your credit if you've already paid in a large percent of the cost of the car). This can often be one of the toughest issues for people because if they have bad credit, they may also still be in tough financial straits. See if there is a way to negotiate the down payment or modify payments to make it easier to purchase the car, especially if you are in urgent need of one.
You can get an auto loan if you have bad credit, and it is possible to find reasonable terms for your loan. Ask around and compare what you can get, and you may find that your choices are a lot more flexible and offer better terms than you thought possible. For more information, contact companies like Bay Ridge Nissan.