Understanding Guaranteed Car Finance Options

There are many people who feel that they simply can’t qualify for a car loan. There are many reasons you may feel this way, including a low income or a poor credit history. For most people who are in this situation it is because they have one or more negative marks on their credit history and a low overall credit score.

Despite these factors there are some options available which can you to get a car loan despite your past credit history. These loans are commonly referred to as guaranteed car finance options. Like all forms of car financing these types of loans have disadvantages and advantages.

The most important advantage that guaranteed car finance options is that they allow you to qualify for a car loan, even if you have poor credit history. This can help you to purchase a vehicle even with defaulted loans or a history of late payments. These types of loans are actually designed for people in this type of situation.

The unfortunate truth of guaranteed car finance options is that they always come with certain stipulations and policies which may make them less than preferable for many buyers. The first and most common factor that applies to nearly all of these loans is that they come at a higher than average interest rate. In fact it is not uncommon for a buyer to pay as much as 11 to 12 percent on a loan of this type. This added interest is built in as a protective measure by the financing company to protect itself in case the buyer defaults on their loans. For the buyer this means they are subject to considerably higher monthly payments for a vehicle than someone who has good credit.

Another term used for many of these loans is to require the buyer to place a larger amount of money down to purchase the vehicle. In fact, it is not uncommon for these types of loans to require as much as 20% down on the purchase of the vehicle. To put this in perspective this would mean that a person buying a $20,000 would have to put $4,000 down to qualify for the loan.

This is also used as a method to protect the lender since it helps to ensure that if they do have to repossess the vehicle it will have a better chance of still holding a value higher than or equal to the amount still owed. Unfortunately many buyers simply do not have that much money to put down on a vehicle.

Most lenders who offer this type of loan also have higher than average standards surrounding late payments. While all car loans have late charges most standard loans only charge around $10-$20 for a late fee. Many lenders offering loans for people with poor credit will charge late fees as high as $200.

Buying a car using this method is an option which is designed to help people who have made some mistakes in past. They are also a method which can be used by a person to improve their credit score. In reality they are a good option for many people who have a poor credit history but only providing that they intend to stay current on the loan.

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