Car Loans for People with Bad Credit
On average, the cost of a new car in the United States is ,400 according to the Federal Trade Commission while the price of buying used averaged over ,000, which places that purchase out of reach for most people unless they can get financing for that purchase. Car loans are a common financial transaction as a result of the large cost involved with purchasing a vehicle, and spreading the cost out over time is the only way to make it affordable for most individual budgets. With a majority of consumers purchasing cars by way of financing, car loans for people with bad credit have become common as well.
For people struggling with bad credit, the best sources for car loans tends to be car dealerships. Though many consumer protection agencies will steer people away from financing with a car dealership, more and more experts in the field of auto financing are starting to rethink their opinions on the subject. While many consumer advocates advise getting financing before setting foot in an auto showroom, consumers who have bad credit are more likely to seek their car loans through the dealership since their financing departments deal with a variety of banks and have access to car loan programs managed directly by the auto makers.
Finding car loans for people with bad credit through a bank, credit union, or finance company, means shopping around. Beginning with one’s own bank or credit union has been a traditional option for seeking financing whatever the level of his, or her, credit health may be, but carrying the weight of a bad credit rating may make it difficult to secure a car loan at a favorable interest rate. The amount of assets the borrower has with his, or her, bank will effect any financing decisions by the bank’s loan office as will the habits regarding that customer’s history of credit usage with that institution. But, banks and credit unions may have some limitations as to who they will lend money especially where a bad credit rating is involved and it’s an institution-by-institution standard as to how money is lent.
For auto financing companies, there may be more general standards for arranging car loans for people with bad credit. In these case, this applies to nationwide chains which have to maintain a more flexible lending structure to accommodate a more diverse population of borrowers. The larger the company, the more leeway they have to offer financing to a broader range of customers with better predictors of who may, or may not, fail to live up to the conditions of the loan. Specializing in car loans for people with bad credit gives such companies better tools to analyze the prospective borrower’s finances giving them a better chance of preventing an instance of default.
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