You desperately need a new car, but your credit score is poor and insufficient for you to secure financing the traditional way round. The best thing to do is to look for bad credit loans. It is true that they are more expensive, but you can use different methods to save on them.
Make a larger down payment.
This is the most widely used method for saving on bad credit auto loans. The larger the initial payment is the smaller the amount of money on which you have to pay interest is. This automatically makes the financial product cheaper.
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The only drawback is that you have to use a larger chunk of your savings to make the down payment. Still, apart from getting a more affordable loan, you are also more likely to improve your credit score, as you will afford to make full-size repayment installments on time.
Use another type of collateral to secure the loan.
Instead of securing the financing with your new car, you can use your savings or some investments you have made, such as a life insurance policy, as collateral. This will definitely contribute to the lowering of the interest rate and the overall cost of the financing.
Another benefit is that you will still get to earn income from the interest rate on your savings or investment while repaying the bad credit auto loan. Still, you have to assess the higher risk you are taking very carefully.
Borrow from a credit union.
Historically, these financial companies have offered the lowest interest rates. Even a person with a poor credit score may be able to take advantage of these. In order to avoid making an application and getting rejected, you can readily make a pre-application to a credit union to see what conditions they will pose on your as a higher-risk borrower.
Show the lender that you are a reliable borrower.
You have the opportunity to secure an affordable loan even with a low credit score, provided that you show some proof of your reliability as a borrower. Having a job with a secure monthly income will definitely make a good impression. More importantly, you need to show that you have not defaulted on any loans or credit lines in the past six months.
These factors will automatically result in lower interest rates. Even if they not, you will still have some room for negotiations.
Do not miss to take advantage of one of these ways for saving on bad credit auto loans.
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