Buying a car with a bad credit is not leaving car buyers with a lot of options. Sometimes their only choice for finding finance for their new purchase is a car dealer loan.
Car dealer load deals are not that bad as many people think. However it is true that they may hide a lot of surprises so if you are planning to use a car dealer loan you should be extra careful.
The first thing to watch out for is if the interest rate is fixed. By fixed we mean clearly stated in your contract and that all is written in a way that wouldn’t allow the car dealer to change it later. What many car dealers do is to approve your car loan application, make you sign the documents and give you the car. Later they just give you a call to say that in fact you do not qualify for this loan because you are with a bad credit (which you already know anyway) and that you will have to pay higher interest rates. If you fall into this situation either try to find financing from another place or report this scam and fight back.
Another very popular scam applied by car dealers is to make you find a co-signer for your loan dumming you that this is the only way to get finance since you have a horrible credit history. It will not be difficult to convince you – first of all it sounds reasonable and second of all the car dealer will make you believe that this will in fact repair your bad credit. Later you will discover that your name is not included in the loan documents and that the loan in the name of the “co-signer” although you are repaying it. Not only that this is in fact illegal and may lead to serious penalties but it is not helping your bad credit at all. If a car dealer offers such thing to you must refuse.
If you are a bad credit customer and have difficulties finding a loan, it is quite obvious that you should not overstretch. This means to buy a reasonably priced car and not to buy any extras such as extended warranty. However many car dealers will try to trick you by making you believe you must buy a warranty that will increase your loan in order to qualify. Since you are desperate in getting the car you would say OK. However if you think for a second you will easily see that this is simple trick to increase your loan.
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