For many people today, a broken down car is a disaster, especially if the mechanic determines that your car is completely totaled. If you are like most of the population of the US. and have has a few bumps in your credit history, the thought of trying to finance a new or pre-owned car is a nightmare.
The good news is that the days where those with less than perfect credit were forced to deal with shady dealers or strictly cash with private sellers are gone. There are tons of lenders that work with people who have bad credit. There are even some who only work with people with problem credit.
How Does it Work
Bad credit financing works just like traditional financing. The only real difference is the companies. Big banks and captive lenders (like Ford Motor Credit) buy finance agreements from car dealerships as they are written, and Bad Credit lenders do the same. Most dealers who work with problem credit customer generally work with a network of lenders who only deal in bad credit loans.
Is It the Same as Buy Here Pay Here?
No, in buy here pay here agreements, the dealers are agreeing to let you take the car and write you a personal lending agreement. Basically, they are loaning you the car with the understanding that you will make the payments. BHPH dealers tend to have very high interest rates (as high as 29 percent in some cases), and offer weekly or bi-weekly terms.
How Does Bad Credit Financing Help?
Mostly by rebuilding your credit. Reputable bad credit lenders report to your credit score and report all payments as they are made. Meaning that as you keep to the agreement, you should see the positive history reflected in your credit report.
Bad Credit financing has another advantage over BHPH agreements, and that is fiscal protection. The loans are subject to the same regulations as big bank loans. There are tons of solutions out there for people who need an alternative to traditional financing. Shop around and find the dealer or lender who has the best solution to fit your situation.