There was a time when the only place to get a car with bad credit was a buy-here-pay-here (BHPH) dealership. Thankfully that has changed and you no longer have to be subjected to the legalized theft of a BHPH. Most credit scores can find more traditional financing because many lenders have relaxed their lending standards.
Banks – Not for Bad Credit
Banks still have the strictest lending standards in the industry. In general they will only consider auto loans to credit scores in excess of 670. You may find that a nationwide bank will lend money to a wider spectrum of score as opposed to a regional or local bank that cannot withstand as much loan risk. Still, banks are seldom are a realistic option for people with credit scores in the mid-600’s and lower.
Credit Unions – Slightly Lower Credit Scores
Credit unions offer auto loans to lower credit scores than banks. Many credit unions offer a savings-secured loan. This allows you to use your savings account to secure a loan. You will need to have the purchase price of an auto, plus all interest and fees on deposit with the credit union to take advantage of this type of an offer. It may be more cost-effective than a traditional loan, which is secured by the vehicle itself. However, you will, of course, need the necessary cash in savings to qualify.
Subprime Auto Lenders – Most Popular Choice
Second chance auto financing can take many forms. Whether it is a brick and mortar finance company or an online lender, there are hundreds of options available to just about any credit score. The interest rate is traditionally higher depending on your credit score. You may also need to supply a larger down payment, that someone with a better score, but the loans are much more affordable than a BHPH lot would offer. You can utilize a service like My Car Lender to find a lender or dealer willing to approve to buy a car with monthly payments.
Having said all of that, most banks and credit unions will allow you to buy a car from most any franchised, non-independent dealership. A brick and mortar finance company usually works the same way. Some online finance companies only work within a set network of dealerships, limiting your selection. While this may sound restrictive, it is a much better set-up than a BHPH.
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