Tue, Aug 23, 2011 Posted by Kelvin

The point of this article is not to discourage you from applying for and taking out a bad credit car loan.  Actually, it is the exact opposite.  There is a lot of ambiguity and confusion out there about bad credit car loans.  No, they are not tote the note pay by the week dealers.  Bad credit car loans are legitimate loans that improve your credit when you pay them back on time.

Several pieces have been written recently comparing bad credit car loans to the subprime housing loan crisis of 2008.  The critics point out that bad credit car loans will not help your credit but hurt it if you fail to make the payments.  All of this is true.  However, the same is true if you have good credit, take out a traditional car loan and fail to make the payments.  Your good credit goes to bad credit just like that.

Critics also contend bad credit car loans have higher interest rates than regular car financing.  This is also the case but the bad credit auto lender is taking more of a risk of default by lending you the money due to your credit history and must protect their investments in case of default on the loan.  On the plus side, bad credit car loans do not penalize you for making extra payments or adding money on the existing payment.  This, combined with a ten percent down payment will allow you to trim off a good deal of the loan’s interest.

The next complaint is about the higher chance of getting your car repossessed if you finance it through a bad credit car loan.  Repossession is not an issue singular to bad credit car loans.  If you have a regular loan and miss even one payment the lender will often begin proceedings to repossess the car.

Your credit may get even worse.  Again, no one is disputing that. Regardless of credit status if you miss car payments or have a car repossessed it looks horrible on your credit report.  Most folks that have been through bad credit have learned to scale down on what they buy and may be a little less likely to over finance a car than someone with good credit.

With bad credit car loans, just like any loan, you have to use common sense.  Buy a car that is economical and that you can make payments on with as little pain as possible.