Are there Specialty Car Loans for People with Bad Credit?

There are many unique options for car loans for people with bad credit. These loans may be offered through dealers, banks or dedicated lenders. In all cases, these loans will be more expensive based on higher interest rates. However, for many high risk borrowers, there is not an option for an inexpensive loan. Simply securing financing is often the most important thing for high risk borrowers. Seeking a loan particularly for high risk borrowers will make the application and approval process much easier.

High Risk Car Loans

High risk is the term used to describe individuals with bad credit or no income, among other factors. High risk car loans may come from the dealer, but they are often issued through banks or online lenders. These loans are usually given as unsecured high risk personal loans. They have very high interest rates and pose a lot of risk to the lender. Lenders dedicated to high risk opportunities are usually the best source for high risk personal loans. They will come at very high auto loan rates. However, they may be beneficial to a borrower who can pay off the loan on time. First, the borrower will get the financing needed to purchase the new vehicle. Further, the borrower will see a huge jump in credit score when paying off an unsecured loan. 

Bankruptcy Car Loans

Bankruptcy car loans are particularly available to those who have a bankruptcy on their financial record. There is a statute of limitations on bankruptcies that typically extends between 10 and 15 years. When you are seeking a car loan within that statute of limitations, you will be a very unattractive borrower to most lenders. You may have to seek out special bankruptcy loan lenders. You will likely be required to provide an income guarantee to show you can afford to make monthly payments. These loans will additionally be expensive, but, like high risk loans, they are a good way to rebuild credit.

Adjustable Rate Car Loans

Opting for adjustable rates can be beneficial to those with bad credit. While adjustable rates mean monthly payments and costs will fluctuate over time, they leave the window open for lower rates in the future. Additionally, a person may be able to get a low or sub-prime rate in the beginning when he or she is just recovering from a financially damaging event. As that person rebuilds financial stability, the cost of the loan will rise as well. This option is risky unless the borrower assures certain limitations regarding how high the rates can adjust.

Secured Car Loans 

Most car loans are secured against the vehicle itself. This means the title to the car is placed on hold with the lender until the loan is paid off. Secured loans provide lenders more protection in case of default. They will offer the loans at a lower rate due to this protection. When you have bad credit, using secured loans and placing assets as collateral can make your application more appealing and your financing more affordable.


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