Getting An Auto Loan With Bad Credit
March 12, 2010
Getting an auto loan with bad credit is something people rarely talk about. Aside from offers on TV, most people do not want to admit that they have bad credit. There is a stigma attached to having bad credit that far exceeds any negative associations that financial mismanagement should have.
With the recent widespread financial difficulties, bad credit has become more common. It has become difficult for many to keep up with bills and credit scores are taking some hits. Still, people need cars to get around so getting an auto loan with bad credit is becoming a more common concern.
Do You Have Bad Credit?
This question isn’t as easy for people to answer as you might think. Many people decide that they have good or bad credit without even knowing their exact credit score. Many people just assume that they have bad credit without reviewing their credit report and the same goes for those who insist that their credit is excellent.
What is a good credit score? Again, this is a difficult question for many to answer. You would think that with all the talk these days of the importance of maintaining a good credit score that people would know what one was or at least they would know the point at which a credit score has turned from good to bad. Still, this isn’t the case.
In general, a score of 680 or above makes it rather easy to find a decent auto loan. Any score below that means that a person should be working to bring it up. The cutoff point changes but this is a place to start. Know your credit and look into what various lending institutions are offering for people with your credit rating.
Using Collateral In Place Of Good Credit
If you do in fact have bad credit then all is not lost. One way to get around the credit question is by having collateral. Collateral can assist someone with bad credit when it comes to getting a loan.
Collateral, in some cases, can almost make a credit score irrelevant. Lenders just want to be assured that they will not lose money on their investment. Collateral shows that the value of the loan will be paid back one way or another.
Sometimes the car that is being purchased can be put up as collateral. It should be noted that this means that if the borrower fails to make payments that the lender will seize the car to cover the payments that are not being made. This option should only be used if an individual is certain that the payments can be made.
Putting up the car itself as collateral may sound like an ingenious idea but there are many other types of collateral that work just as well if not better in this situation. Homes, property deeds, and other valuables can be used as collateral to help an individual secure an auto loan. Any of these can be used as collateral and can be used in lieu of good credit to help someone get their hands on the auto loan that they need.
Getting an auto loan with bad credit has always been possible. It may be more difficult and more expensive but it can be done. By knowing if you fit into the bad credit category and then using collateral to secure a loan if you do, you can obtain an auto loan even if you have bad credit.
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