Finding the best bad
credit car loans is not difficult providing you know what to look for and
what to avoid when choosing. Many people simply act too quickly when they come
across a perceived ‘good deal’, and they fail to scrutinize properly the terms
of the loan. This can spell a lot of trouble for you down the road, so in this
article I am going to reveal the top three things you must avoid when selecting
a used car loan. This knowledge will safeguard your investment and peace of
mind, so let me get right into it.
Pitfall #1 – Long
Term Lock-ins
Lock-ins refer to
terms that would make it difficult to refinance the car at later date, should
more favorable conditions arise. Refinancing can be great way to get some cash
back and reduce your monthly payments. Loan companies know this and so they
usually work into the terms of the loan, penalty clauses that make it difficult
for you to refinance later on. Another big thing that they like to do is have
very punitive early redemption policy. This also acts as a disincentive for you
to ‘settle’ the loan early.
Used cars are also intrinsically not as valuable as new
ones, and as result loan companies like to force you to borrow as little as
possible, in order to reduce their risk exposure.
Pitfall #2 – Inflated
Interest Rates
This usually occurs when a loan company know that the
borrower (YOU) doesn’t have a good credit standing. The credit industry whilst
unanimous on what makes bad credit, doesn’t give guidance or protection as to
how each credit category should be treated by lenders. All this ambiguity leads
to exploitation and so whenever you engage a loan company, always compare their
rates to other lenders.
As an aside to this pitfall, I would also like to mention
the fact that car dealer financing is the home of inflated interest rates. And
to add insult to injury, dealers also inflate the price of the car too. All in
the bid to milk you for all your worth.
Pitfall #3 – Using A
Brick & Mortar Loan Provider
Online companies are cheaper, that’s just a fact. In order
to benefit from these huge saving you simply must avoid using an offline loan
provider. There are other practical benefits to using an online provider. One
of the other main benefits is the approval process, which in some cases can
occur in a matter of minutes. Online companies are also offer greater
flexibility in terms of lending specialty. And since you are looking to buy a
used car, this flexibility will help you quite a lot.
You now have the knowledge that can help you avoid the
greatest pitfalls when choosing the best used car loan. Use them wisely and
good luck.
