About Bad Credit Car Loans

Bad credit car loans can give you the opportunity to buy the car you want in spite of your credit challenges. Read on for an explanation of what bad credit car loans are and some tips for bad credit borrowers.

Bad Credit Car Loans Explained

If you've been denied for traditional financing by a dealership or bank, you probably received the explanation that the institution only lends to "prime" borrowers. You, unfortunately, probably fell into what the lender calls the "subprime" category. What this means is that your credit score is too low to qualify as a prime borrower, which can preclude you from receiving auto financing from many traditional sources. With most lenders, having a credit score below 620 places you in the subprime category. However, being a subprime customer doesn't mean that you can't ever borrow money again. In fact, there is an entire market of lenders who are more than happy to give bad credit car loans to subprime borrowers. Of course, the rates of bad credit car loans tend to be a little higher than those of traditional loans, but this simply reflects the additional risk the institution is taking in lending to you.

Borrowing Tips for Bad Credit Car Loans

Getting reasonably priced bad credit car loans is not that difficult, but you do have to know what you're doing. Here are some tips to help you get affordable bad credit car loans:

• Review your credit report. You should always check your credit report before you apply for any major loan or other line of credit. Review it for accuracy and correct any erroneous information. Incorrect information on your report could unnecessarily drag down your credit score.
• Find out your credit score. New legislation empowers consumers to access their credit scores, which were once off-limits to everyone but lenders. You can now access your credit score online via any of the three major credit bureaus: Experian, Equifax, or TransUnion. Find out your credit score to assess where you stand with your credit. If you have bad or subprime credit, you will want to know this before applying for traditional or bad credit car loans.
• Don't finance through the dealer. Dealers pad their loans to ensure they get enough of a profit off of your financing deal. Thus, even if you do qualify for financing through the dealership, you will probably still get a raw deal if you do so. Your best bet is always third-party financing for bad credit car loans.
• Comparison shop. Some lenders offer much more competitive rates on bad credit car loans than others, so it is important to shop around to find out which lenders will give you the best deal. If you use our site, we will do the shopping for you.
• Remember that credit scores can change. You might only qualify for bad credit car loans now, but always keep in mind that credit scores are malleable. That is, you can drastically improve your credit standing over time by paying your bills promptly, using credit responsibly, and improving your balance-to-limit ratio. If you work on improving your credit, you might be able to refinance your bad credit car loans for better rates in the future. Visit our how to interpret credit scores for more information.