Car Loans With Bad Credit: Pros And Cons of Dealership Loans
Securing a car loan with bad credit can be something of a challenge, but there are options out there. One of them is applying through your dealership, but is this the best choice?
The problem for bad credit borrowers is that they frequently have to accept bad terms if they are to be approved. And more often than not, they are left waiting anxiously before they learn whether their application has been approved or not. But the good news is that getting approval despite low credit scores is very possible.
Amongst the options available to bad credit borrowers is car financing through the car dealership itself. This is a popular option when an applicant is not sure if their car loan will be accepted by their bank, but there are pros and cons to it that should be noted.
The Advantages of Dealership Loans
First, the pros. It can be a complicated matter applying for a car loan with bad credit. Not only is there some uncertainty that the application will be accepted, but there is paperwork to do on two fronts. Going through the dealership actually reduces the amount of work involved in the application.
This is because the dealers will sit down and help their customer fill out the forms, and will look after everything else from the submission to securing the best terms possible from the lending company. Obviously, dealers do not lend money themselves, so there is no guarantee given of receiving approval despite low credit scores.
So, the process of finding financing is simplified, with everything done in one place. However, bear in mind that the car loan may not be granted if the credit score is deemed to be too low. Applicants with scores of 620 and over should be okay, but those with 600 and less may have mixed luck.
The Disadvantages of Dealership Loans
The convenience of applying for a car loan with bad credit in one place is undeniable, but there are negatives to this choice too. The biggest negative is the expense that these loan deals prove to be. This is not just because of bad credit, but the dealer usually tags on extra charges to cover their service.
While this may seem fair enough, the truth is that as much as 3% extra can be charged on the loan. Given that the lender is likely to charge as much as 9% on the loan, it means that the actual interest on the loan is 12%. The extra 3% goes directly into the pocket of the dealership, even though processing the loan application involved a minimal amount of work in the first place.
Also, the chances of getting approval despite low credit scores are not actually any better when applying through a dealership. The dealer has a direct link with a specific lender, but the decision on whether to approve a car loan or not is solely at the discretion of the lender.
So, with traditional lenders so reluctant to lend to bad credit borrowers, and dealers usually the expensive option, where is the best place to seek a car loan with bad credit? Actually, the best options are to be found on the Internet, where online lenders are known to offer good terms.
Online lenders specialize in lending to bad credit borrowers, and as such have a range of loan packages that are ideally suited to the particular needs of that niche. So, approval despite low credit scores is more likely because of the superior repayment structures, and interest rates charged on the car loan are lower to ensure greater affordability.
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ABOUT THE AUTHOR
Devora Witts is a certified loan consultant who helps people get approved for Loans for People with Bad Credit and Bad Credit Mortgage Loans. To get aid with your financial situation you can visit her at http://www.badcreditloanservices.com