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Bad Credit Car Loans: Are They Worth It?

In the United States, it is a general rule that if you can save money for a down payment, you can find an automobile dealer somewhere who will help you get financing for a car, even if you have bad credit. An unscrupulous car dealer will do whatever it takes to get money out of your pocket and his or her cars off the lot. With this in mind, if you have bad credit, you should count the cost of accepting a bad credit car loan, even if you think you desperately need a car.

The High Cost of Bad Credit Car Loans

Any automobile purchase involves a significant outlay of cash over time. If you have bad credit, you will pay more in every aspect of an auto purchase than a person with a great credit rating. More than likely, you will have to give the dealer a large down payment for the privilege of getting auto financing. In addition, your interest rate will be high. These two factors add thousands of dollars to the total cost of your new car.

Consider whether there may be a better use for your hard-earned money than paying high interest and a large lump-sum down payment for a bad credit car loan. If you have low-cost transportation options available to you, such as public transit or cycling, take advantage of them while you save money and repair your credit.

Trade-Ins Can Turn You Upside Down

Car dealers are more than happy to accept your car as a trade-in, for several reasons. One, the dealer is receiving an asset – your car – that he or she can resell. Two, if you still owe money on your trade-in, the dealer will include the amount owed for the trade-in in the amount financed for the car you want.

If you sign the loan contract, you have allowed the dealer to place you in an "upside down" loan. You will pay a high monthly payment for your new car that included the outstanding balance of your old car.

Think Before You Buy

Consider whether getting another car is truly worth the high expense. Do not take on high interest debt and place yourself at risk of defaulting on the loan. Perhaps you should continue driving your old car until you have completely paid the loan, sell it yourself, and use the proceeds from the sale as a down payment for your next car. Remember that buying a car is a privilege, not a right, and if you have bad credit, adding another loan may not be the best idea for you.

If you have bad credit and you need help, contact Advantage CCS. Our experienced credit counselors can help you work out a debt management plan and get back on track. We can help make your goal of one day purchasing a new car a reality.