Bad Credit Auto Loan Lenders

In these days of limited credit, mitigated lender risk, and mountains of qualifying paperwork for the smallest of loans, making sure that you qualify for adequate automotive financing is a tough, almost impossible process. From lengthy credit report forms to mountains of additional paperwork for your income, current assets, and vehicle ownership history, taking out a loan is no longer an easy task.

This appears to be true almost regardless of the vehicle that you’re planning to buy, be it a used and inexpensive Toyota or a six-figure Bentley. The automotive lending industry is now in tune with the risk of today’s lending market, and it appears to be tightening its grasp on its borrowers, keeping an eye on the industry as a whole to ensure it isn’t subject to its own credit crunch or meltdown.

Thankfully, however, there’s still some potential in the auto lending world, particularly for people searching for new cars. With financing available from both standard lenders and lenders that have started to specialize in bad credit loans, it’s actually fairly simple to find a loan that suits your own credit history, your vehicle preferences, and the schedule at which you’d like to make repayments.

In this guide, we’ll be looking at bad credit auto loan lenders – the one-stop lending shop for all would-be car owners that have been turned down or pushed away from standard loans. While it’s tempting to label all ‘bad credit’ loan providers at once, it’s actually best to look at them on a one-by-one basis. One lender isn’t necessary the same as another, or the industry as a whole.

Firstly, let’s begin with the type of situation in which a bad credit auto loan lender makes sense for you, as a borrower. You likely have a credit score that’s been affected by late payments, or even an unpaid loan or default. It may be at a range of 500 or lower, pushing you out from all but the most risk-friendly lenders, many of whom will have fairly high interest rates on their vehicle loans.

This situation, while it seems like a nightmarish fantasy for some, is a relatively realistic situation for many borrowers. With a credit score that’s stained from negative past actions, a poor borrower history, and a series of marks on their credit record, it’s hard for many borrowers to secure any car financing at all. Traditional lenders push them away, while online lenders balk at their history.

It can seem like a helpless situation – a catch twenty-two that both limits you from borrowing any amount of money towards a new car, while also limiting you from taking out loans that you’d need to improve your score in the first place. Thankfully, there’s a solution, and it rests in an auto loan from a bad credit auto loan lender – a business that specializes in this type of borrower.

There are downsides to bad credit auto loans, and it’s sensible to understand them before you invest in any form of vehicle financing. While automotive financing can be a relatively affordable process on the whole, the interest rates that you’ll find at a bad credit auto lender are often a reasonable level higher than the market as a whole. This is simple risk management, and it can hurt borrowers.

This means that throughout the lifespan of your loan, you’ll spend more money to purchase your car than you would have with a good credit score. You’ll also face higher loan-related fees on average, a second disadvantage of using a bad credit auto loan lender. This is a secondary risk mitigation tactic for lenders, as the increased risk of borrower default calls for higher rates and fees all round.

Finally, you’ll face a limited choice of vehicles, largely based on their pricing. With a strong history of timely repayments, responsible borrowing, and strategic financing, you would have been able to take out a relatively large automotive loan, should you need to. With no history, or a poor history of missed or late payments, you’ll be limited to only the inexpensive, financially secure vehicles.

In many cases, this means that you’ll need to purchase a used vehicle in order to qualify for any type of financing, as the relatively higher cost of a new vehicle makes it difficult for lenders to justify the risk of loaning you money. This can vary from lender to lender, as many have different pay cut-offs. If you’re searching for a relatively expensive car, it’s best to ‘shop around’ at many different lenders.

With these disadvantages understood, there are some key advantages to working with a bad credit auto loan lender. The first is that it’s almost always a temporary step. If you can work through your loan, making timely repayments and meeting goals, you’ll see an improved credit score on the other end of the tunnel. This will allow you to qualify for more affordable credit in the future.

You’ll also be able to build a history of successful borrowing – a record that can eventually help you when aiming to close on a home or other property. Despite the negative reputation that’s attached to many bad credit auto lenders, they do offer a useful service. Whether as a stepping stone or purely to help you in finding a great new vehicle, working with a bad credit lender really can help you.