There are many myths that surround bad credit auto loans. These myths are often successful in discouraging and keeping car buyers like you from financing your car and even improving your credit. If you have bad credit, let us help you find hope by debunking some of the top myths about bad credit auto loans.
MYTH #1: No auto loans for people with bad credit.
It’s true that good credit boosts your chances of getting approved for a great auto loan deal. But getting approved for car loans is not exclusive to people with good credit. You can get an auto loan even if you have bad credit.
With less-than-perfect credit, you might find it hard to get approved for auto loans in banks. However, there are numerous auto lenders here in the Springs that specialize in helping people with bad credit. Some of them are competitive and offer reasonable rates. Eligibility requirements may be tighter but you at least have an opportunity to give an auto loan a shot.
MYTH #2: Repaying the loan for more than 60 months will save me more money.
While long auto loan terms have lower monthly payments, they could also mean paying more for your car. Remember that you pay more interest when the loan term is longer. Shorter terms like 48 to 60 months are better when you have bad credit even if the monthly payments are bigger. Make some computation to find out that you can actually save more money by taking out a shorter auto loan.
MYTH #3: The interest rate cannot be negotiated down.
Interest rates for bad credit auto loans may be higher but that doesn’t mean that you cannot negotiate for a lower rate. Before signing the loan contract, try to negotiate the interest rate down. There are also several ways to get a lower interest rate. You can put bigger money down or improve your credit even just a little before applying for a loan. You can also refinance the car loan later when your score gets higher.
MYTH #4: Getting approved for bad credit auto loan takes longer.
Not necessarily. Service time still depends on the lender. But there are a lot of auto lenders now that facilitate the approval process online. In this case, it would only take a day, at shortest, to process your application. You can experience fast approval here at Colorado Springs Auto Approval Center.
But be careful with online lenders that promise unbelievably quick approval process. Too-good-to-be-true offers usually turn out to be scams.
MYTH #5: A bad credit auto loan might only worsen my credit.
It depends on how you will pull off your payments. Bad credit auto loans are actually opportunities for you to improve your credit, but only if you consistently pay on time. Otherwise, your credit may actually get worse especially with a higher interest rate and late-payment penalty.
MYTH #6: Bad credit and no credit are the same.
They may look similar in a lender’s eyes in some way but they’re not exactly the same. Bad credit means you have a low credit score. No credit, on the other hand, means you don’t have any established credit yet. Thus, you don’t have a credit score. That’s the big difference.
However, lenders consider both credit statuses as high-risk because there’s no solid basis on which they can evaluate your creditworthiness and reliability as a payer.