Financing a second hand car Online with bad credit, beware.

Financing a second hand car  Online with bad credit, beware.

The world of car finance is not complicated when compared to other finance sectors like the stock markets with products like futures which are hard to define never mind understand. However car loans and finance are still complicated concepts when compared to shopping for other products we are more used to purchasing like cd’s, laptops and books. As we have explained in other articles ignorance can cost you money in finance. It pays to spend some time understanding the broad concepts and forces that shape car financing.

This article will focus on what signs you should be looking out for that signal a dodgy or suspect car financing company or loan. The only reason we need to point these signals of suspect car loans is because you are not used to how they work. Just like you would be pretty skeptical if you found a shop that sold ipods for 10$ a dozen, some car loans just stand out as suspect.

Some of the examples of car loans we will mention are not necessarily bad but might appear to be what it’s not and is therefore worth noting the real nature of the car loans.

Bad Credit, No problem.

Car loan companies that advertise: Bad credit no problem, are either exaggerating, lying or won’t be in business for long. Finance companies don’t increase interest rates on bad credit customers out of spite. It is necessary to increase the interest rate on all customers that have bad credit, because a lot of them don’t pay (therefore their bad credit) and the higher interest is designed to balance the losses. If a company does not do this and continues accepting bad credit customers it will not take long for it to go bankrupt.

Therefore if you see adverts like that, bad credit, no problem, you should probably read: Bad credit, don’t worry we’ll give you a car loan no problem but it will cost you buddy. And that’s fair enough. If your past credit history is bad, you should expect paying a little more. Once you faithfully repay your credit your rating will increase and you will go back to paying the “low prices” for credit.

100% (or 90% or some other incredible percentage) applications approved.

This advert is seen often in car insurances. It is much better to read: ” We are more likely to accept your application because we take sub-premium clients with bad to terrible credit scores, but it will cost you”. You have to admit my rendering is not as punchy, but much more accurate.

There are two kinds of car loan or car finance companies, those that advertise good interest rates (read: low interest rates) and those that advertise high approval rates (read: low requirements, high interest). In the real world low interest and high approval rate don’t mix, not for long anyway.

These are only two of car loan types you might do well to beware of. Not necessarily avoid, but certainly treat with care and attention before committing.