The same circumstances that led you into a bad credit history can also make it difficult for you to afford a new car, or even to obtain a loan for a less-than-perfect vehicle. Fortunately, there are bad credit car loans that are designed to help people in circumstances like yours. These loans can help you get into a vehicle you can afford, but only if you know what to look for. Use the following questions to help you make the most of these loans.
How much interest will you pay over the life of the loan?
You may be excited, for example, about finding a car for $5,000, but if you end up paying $35,000 in interest over several years, you’re not getting a very good deal. You’ll probably have to pay a high interest rate, but ask specifically how much that will become over the length of the loan.
Is there a prepayment penalty?
Sometimes, especially when the price of a vehicle is low and the interest rate is high, the contract will include a prepayment penalty. This means that you won’t be able to increase the amount of your payments or use a bonus to reduce your debt. It is always a good idea to get rid of a prepayment penalty, if possible.
What are the requirements for refinancing the loan?
In some cases, you’ll be able to make changes to the loan as your credit improves or once you’ve successfully proven that you can make consistent payments. Find out what those steps are, so you know how long you have to deal with the poor terms of the loan and the specific steps you have to take before you can arrange better terms.
With these questions in mind, you may be able to get valuable information that leads to better decisions regarding your new car purchase. Your poor credit doesn’t have to keep you out of a car and it shouldn’t mean that you’re saddled with a terrible loan for years to come.