Due to the high numbers of competitors in the market today, getting a car loan isn’t as challenging as it used to be. Second chance car finance is obtainable to those with bad credit, bankruptcies, and repossessions. Getting a bad credit car finance loan is a great way to purchase a new or used vehicle, but good auto loan rates however, do require specific criteria.
The most important criteria that lenders are looking for when it comes to second chance car finance is verifiable income. Verifiable income means that lenders will require proof of income by requesting documents such as tax returns and bank statements. Current residential address will also be necessary to provide to the lender.
The determination of the loan rate is decided based on the type of car the loan will be used to purchase, the borrower’s personal credit history, and the timeline of the loan. Car financing can be obtained using direct or indirect financing. Direct funding is when a loan is received from a financial institution such as a bank or a non-traditional lender. Approval is based is for a specific amount and a voucher is given to purchase the car of choice. Indirect funding is when a loan is through a car dealer. When a car is decided on, the dealer works with a financial institution to get approval for the amount of the desired car.
When looking for second chance car finance, it is also important to decide on a secured or unsecured loan, and more importantly to know the difference between the two. A secured loan is where the lender is given the rights to a portion of a specific property, usually a home, as collateral for loan payments. If the borrower fails to make payments, the lender can repossess the home or property. These types of loans generally offer lower interest rate and can have the option of extending the repayment period. An unsecured loan is a loan that is not tied to any piece of property or real estate. These types of loans are more costly because the lender takes a higher risk of not being paid back. An example of an unsecured loan would be a credit card.
Getting a good rate on a car loan requires the best mix of all the requirements lenders are seeking in a borrower. However, when all points are not met exactly, indirect funding or an unsecured loan could be the answer to getting into that new car. Also, for those who have bad credit, there is bad credit car finance that can ultimately be used to build some good credit history.