Liberty Auto Loan: Sometimes people just need a second chance… Auto financing is no exception!
Many people who have bad credit, or no credit, are in that position due to some unwise decisions with regard to credit. Without some major lifestyle changes, the average consumer struggling with bad credit is going to stay in that hole and suffer with all the financial challenges that come with the territory. Some people do believe there is no way out of a bad credit situation, but that just isn’t true. Rebuilding credit takes time, but it’s a straight road from bad credit to good credit and second chance auto financing can help.
Second chance auto financing comes in different forms. One type is offered by lending companies and is very much like any other sort of financing except for interest rates and certain other requirements. In this case, lenders set minimum standards for income to ensure that the borrower does have the means to pay the money back. The lender will also require that the borrower make a down payment of 20%, or more, of the total cost of the vehicle. On the subject of total cost, this doesn’t just mean the purchase price of the car. It includes the tax on the vehicle, registration fees, insurance, lending fees, and interest. All of these things must be calculated when the borrower is ready to present a down payment.
High-interest rates are standard with a second chance auto loan. This is to cover the lenders costs in risking a large amount of money with a borrower who has a poor credit reputation. Although there are limits to the amount of interest charged by lenders, this doesn’t mean that a borrower is going to see some sort of discount. The difference between an auto at 6% interest and auto at 8% can mean hundreds of dollars over the life of the loan. High interest can be offset by a generous down payment. This has the effect of reducing the balance on which interest will be paid, and helps to secure the loan so the lender will be more favorable in offering lower rates.
Second chance auto financing can be offered through many car dealerships. Manufacturer authorized dealerships have access to numerous financial institutions as well as incentive packages backed by the automakers themselves. While these dealerships will sell car loans to people with poor credit, people who are looking auto loans with no credit are usually turned down in spite of the flexibility these dealerships have in who they lend to. Enter the Buy Here/Pay Here dealerships. These businesses carry their own financing on their own vehicles. Usually not associated with a particular manufacturer, these operations are still big enough to handle the financing themselves. They often aim their marketing at people in tough credit straits with financing that carries stringent conditions, high-interest rates, and require large down payments. These businesses are not just a second chance in auto financing, they’re the last chance.
Where second chances are involved, a screw-up had to have occurred on the first go-around, and second chance auto financing is the opportunity to fix what went wrong. Successfully negotiating a second chance auto loan and sticking with the agreed upon payments to the full term, can improve a consumer’s credit rating moving them up to a better lending category by the time it becomes necessary to finance another car. When a consumer’s reputation is at stake, a second chance is always welcome, and the chance at replacing a car without having to burn up a lot of cash by paying full price upfront is a welcome relief.