Want a car loan, bad credit, no problem.

Car loans, bad credit, no problem? More like no chance, you might say.

However that might not be necessarily true. Although having a bad credit history does make getting a loan harder, and higher interest rates likely. It might be your way forward to a better credit score. How does this work?

1) Car loans and credit scores.

2) What kind of loan should you choose?

3) Which car should you choose?

1.) Car loans and credit scores.

If you have a bad credit score it is probably because due to circumstances you have not been able to pay installments or you have been  late making repayments. Getting a car loan might be the solution to your bad credit and give you the pleasure of owning a new car. Credit scores, car loans and bankruptcy, might seem to go hand in hand. But not if you are smart with your borrowing and your buying.

Credit scores go bad because a) you borrow too much, b) you don’t pay in time, c) you pay late.

If you get a car loan you can afford, for a small amount. You can pay regularly, on time and work at improving your credit score. The interest rate will be higher but you it’s better to pay a high interest on a small amount than on a house.

2) What kind of car loan should you choose

If you have a bad credit it might be hard to be too choosy with your interest rate. This does not mean you do not have to be careful with what you sign.

1) Make sure you are really getting the interest you are being told. As we will see in future articles, some dishonest lenders will lend money, especially small loans. This is how it works. They lend an amount of money, say 1000 dollars. They give you a 8% interest rate. 1000$, 8% interest, 80$. 1080$ divide it between 12 months, 90$ a month, BINGO. Wrong, you are being charged something closer to 16% interest. This is because if you are paying a monthly payment, some of that repayment should go towards paying the capital of the carl loan, making the interest drop.

2) Get the right, tenure, interest rate ratio for your car loan.

You want to improve your credit score and get a new car at the same time. However you want to be able to pay it. So getting the right monthly payment for your budget is vital. Obviously if your tenure, or the length of your loan is long, your monthly payments will be lower. However it also means you will be paying more interest. Write out a budget and work out what you can really afford.

3) Which car should you choose?

Find a car you like, you can afford and is re-saleable. It goes without saying if you have a bad credit it won’t be the car of your dreams. So choose a sensible car you can resell in the future. Cars that have a good mileage, and get cheap insurance are easier to sell.

So it might be harder to get a car with bad credit history. Does not mean you wont be able to, plus it can be the way forward to a better credit score.