Bad credit car loans are designed to give people that have made mistakes or have had an unavoidable life change a second change at having good credit.
With a traditional car loan, typically a customer will go to the dealership, select their vehicle and then agree on the term and payments, from their a finance manager will get the deal approved at the agreed upon terms.
With a bad credit car loan most of the time the customer doesn’t know what they qualify for, if anything at all so the traditional process doesn’t make a lot of sense.
Typically, a finance manager will first meet with the customer to get a feel for their situation and their current credit hurdles. From there, the finance manager will fill out a credit application with the customer and submit it for what’s called a “pre-approval”. This pre-approval is the bank telling the customer what they qualify for in terms of a monthly payment, this is know as a “payment call”.
Banks use payment calls instead of set amounts of money because it gives the customer more flexibility in vehicle options.
Once the bank has returned that application with an approved payment call, typically the bank will as for proof of income to insure the customer can afford the monthly payment. Usually proof of income can be completed by the customer providing their two most recent paystubs or their previous years T4 and a letter from their employer stating their employment with the company.
After the proof of income process has been completed the finance manager will work with the customer to look at all the vehicle options that fit inside the payment call and the customers driving needs.
The interest rate the customer will be given is based on two things, the first one is the customers current credit rating and previous repayment history, the second is the year and type of vehicle they select.
Bad credit car loan interest rates, generally speaking, range anywhere from 4.99% all the way up to 42.99% and anywhere in between. If you have a stronger repayment history and are looking at a vehicle that’s only a couple of years old or newer, most of the time you will qualify for rates on the lower end of the spectrum. The highest interest rates are reserved for the extreme circumstances.
A great bad credit car loan company will make sure they fully understand your situation so they can relay your information to the banks and ensure you get the best loan structure possible at the lowest possible rates.