Poor Credit Car Loans - 3 Things to Watch Out For
Even though several auto loan lenders regularly approve poor credit auto loans, these loans do not necessarily include the best rates. When applying for a bad credit auto loan, borrowers must take several factors into consideration. In most cases, the loan will include a high interest rate, which increases the monthly payment. Furthermore, the borrower may receive a bad loan such as a long finance term or balloon payment. Having limited loan options shouldn’t mean accepting a bad auto loan. When applying with a sub prime auto lender, stay on guard against these common tactics.
Unreasonably High Finance Fees
While auto loan lenders are justified in charging high rates, unreasonably high finance fees are unfair. When approving a loan application, a dishonest auto dealer will charge buyers a rate two or more points above the average. For example, if a bad credit borrower qualifies for a rate of 10%, the dealer may charge 12% or 13%. The extra money doesn’t go to the lender. Instead, the auto dealer pockets the difference. You can avoid this common practice by arranging your own financing and shopping around for the best deal.
Complete the Deal before Leaving the Dealership
Sometimes, the auto dealer will convince a customer to drive a car for a few days or weekend. This allows the customer time to make a decision about buying the car. Because the majority of customers get attached to the vehicle, they are more inclined to return to the dealership and complete the purchase, even if it means accepting a bad deal.
In this case, the auto dealer may present a shaky loan deal. These deals generally consist of a high interest rate and longer loan terms. The best way to avoid this tactic is to complete the sales deal before driving the vehicle off the lot.
Read the Auto Loan Agreement Carefully
Some bad credit auto lenders include unfavorable terms into the loan agreement. Buyers who fail to read the contract may end up paying a balloon payment, or agree to an upside down loan. Before signing your name to the contract, carefully read the document. If necessary, ask questions. Additionally, ensure that the loan terms, rate, and payment included on the contract match the original quote.
Unreasonably High Finance Fees
While auto loan lenders are justified in charging high rates, unreasonably high finance fees are unfair. When approving a loan application, a dishonest auto dealer will charge buyers a rate two or more points above the average. For example, if a bad credit borrower qualifies for a rate of 10%, the dealer may charge 12% or 13%. The extra money doesn’t go to the lender. Instead, the auto dealer pockets the difference. You can avoid this common practice by arranging your own financing and shopping around for the best deal.
Complete the Deal before Leaving the Dealership
Sometimes, the auto dealer will convince a customer to drive a car for a few days or weekend. This allows the customer time to make a decision about buying the car. Because the majority of customers get attached to the vehicle, they are more inclined to return to the dealership and complete the purchase, even if it means accepting a bad deal.
In this case, the auto dealer may present a shaky loan deal. These deals generally consist of a high interest rate and longer loan terms. The best way to avoid this tactic is to complete the sales deal before driving the vehicle off the lot.
Read the Auto Loan Agreement Carefully
Some bad credit auto lenders include unfavorable terms into the loan agreement. Buyers who fail to read the contract may end up paying a balloon payment, or agree to an upside down loan. Before signing your name to the contract, carefully read the document. If necessary, ask questions. Additionally, ensure that the loan terms, rate, and payment included on the contract match the original quote.
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