Things to Beware Of
with Bad Credit Car Loans

It’s a gimmick some bad credit lenders and dealers use to get you to apply or visit. It’s a meaningless promise.

• To reduce their risk, the lender or dealer will require you to make a large downpayment before taking delivery of the vehicle
• If you can’t afford the downpayment, they’ll approve you for a vehicle of less value – often with high mileage.

There are a lot of websites for bad credit car loans. Many are what are known as ‘lead generators’ – companies that don’t offer financing or cars. Instead, they collect the personal information you enter on their online applications and sell it to new or used car dealers in your area.

• Because lead generators often have multiple websites that look different from one another, you may end up sending duplicate applications that go to the same dealers and lenders.
• That can result in your credit report being requested multiple times – which takes you to ‘Deal’ 5 to Beware Of.

Older and high kilometre vehicles are a ‘deal’ to very beware of. While they may have lower monthly payments, they almost always cost more in the long run.

• Repair and maintenance costs are much more likely, which can quickly offset “lower” payments – and throw your budget into turmoil.
• If the car dies before the term of your loan, you’ll be forced to pay for a car you can’t even drive.

A ‘deal’ to avoid at all costs is a long term car loan. To make a vehicle “fit your budget”, a dealer may spread the cost out over a longer period of time so your montlhy payments are lower. What they’re really doing is locking you in to a long-term loan – often at a high interest rate. That’s the last thing you want to do.

• It’s a financial obligation with no escape – and much of what you’re paying is interest.
• The car could die or reach the point where it’s not worth repairing before you’ve paid off the loan. But you’re still on the hook for payments.
• When your credit situation makes higher interest rates unavoidable – your goal should be to pay those rates for as short a time as possible.
• A shorter loan or lease lets you rebuild your credit faster so you can upgrade your car or refinance sooner at a better rate.

Dealers and bad credit car loan websites often ‘shop’ your credit to many lenders – and may even tell you that it’s to your advantage. In reality, it often hurts your credit.

• Too many credit bureau inquiries over time can reduce your credit score.
• To a lender, all these credit inquiries suggest that you’re desperate and have been turned down repeatedly.
• You’re likely to end up with less favourable financing terms if you’re approved at all.