Finding a Loan to Finance the Purchase of a Vehicle

Consumers with poor credit usually find it more difficult to qualify for and meet the criteria of traditional lenders.Banks and finance companies offer financing to borrowers who need funds to finance the purchase of an used or new vehicle, to pay their medical or hospital bill, etc. Financial institutions offer secured and unsecured loans to new and existing customers. While there are loan sharks that pray on debt-ridden borrowers, most finance companies offer bad credit loans.

Funding Small Purchases

Financial institutions offer better terms and interest rates to borrowers who apply with a cosigner. Borrowers often opt for this type of loan because they are not required to offer some asset (car or real estate) as collateral.One option is to present a schedule that shows how you plan to repay the loan. Financial institutions take more risk when you apply without a cosigner and offer higher interest rates. The presence of collateral mitigates risk for banks, and they offer competitive rates.

Customers with tarnished credit are offered lower loan limits and pay higher interest charges and fees. This is a good way to rebuild credit and apply for a loan with favorable terms. Those with a score of 550 or lower may find it hard to qualify. Financial institutions that offer secured loans require that borrowers provide proof of residence, employment, and income. When it comes to building credit, the problem is that this takes some time, and some borrowers opt for seller financing that comes with beneficial features such as fast closing, flexible down payments and terms of repayment, affordable interest rates, and more lenient qualification criteria. Knowing your score gives you more bargaining power.

Because of the high default rate compared to other types of financing, the interest rate is also higher. Borrowers with poor credit have other options, depending on the vehicle and loan amount. There are taxable and non-taxable income sources such as employer-provided insurance, disability insurance, investment instruments, inheritance, and tax. Another option is to build credit and apply for a conventional loan. In any case, they require a down payment, stable income, and steady employment.

Whether you need a cosigner depends on your credit rating and the loan amount. Banks, car dealerships, online lenders, and insurance companies are possible sources of financing. Check whether your local bank offers good deals.