Interest Rate on Car Loans With Bad Credit
To give you a rough estimate of the interest rate on car loans with bad credit, let’s take a look at the average interest rate on auto loans offered by several online and private lenders.
Generally speaking, bad credit loan interest rates can vary significantly depending on the financial situation of the borrower. They can range between 7% to over 30% compared to less than 3% for good credit borrowers. That’s why it’s best to think twice before taking out a car loan with bad credit.
What are the Advantages and Disadvantages of Taking Out a Car Loan With Bad Credit?
Car loans with bad credit come with many advantages and disadvantages. Let’s take a look at both sides of the coin.
Advantages
The most obvious advantage of taking out a car loan with bad credit is that it’s fairly easy to get approved even if you have a poor credit score or no credit history at all. Instead of looking at your credit score, alternative lending companies will look at your income and employment status to determine whether you are eligible for a car loan. Most often, these lenders will offer you an auto loan even if your credit score is almost non-existent for as long as you can demonstrate that you are capable of repaying the loan.
Disadvantages
The biggest disadvantage of taking out a car loan with bad credit is that the interest rates are definitely way higher than what you would normally pay. This is because online and private lenders take a gamble on high-risk borrowers who may default on their payments. They will charge you a higher interest rate to cover their losses if they lose money on the deal.
Can You Negotiate for a Better Interest Rate on Car Loans With Bad Credit?
The good news is that there are a number of ways on how you can negotiate for a better interest rate on car loans with bad credit. Below are some of the most common options available:
Pay More Upfront
By paying a bigger down payment, you can negotiate a better rate with your chosen lender. Not only will this save you a lot of money on interest, but it will also make your monthly payments smaller and your loan repayment period shorter.
Bring a Cosigner
If you don’t have enough money to put down as a downpayment, you can still apply for a car loan with bad credit by getting a cosigner. Your cosigner will act as your guarantor and will be responsible for repaying your loan if you default.
Offer Loan Security
Another way to negotiate a better interest rate on car loans with bad credit is by offering collateral. If you own something of value such as a home or other property, you can use it as security to get a lower interest on your loan.
Lending Companies That Offer Bad Credit Auto Loans in Canada
Here are some of the top lenders that offer bad credit auto loans in Canada:
Car Loans Canada
Car Loans Canada is one of the leading providers of bad credit auto loans in Canada. They offer bad credit car financing ranging from $7,500 to $55,000 with a loan repayment period between 12 months and 96 months and an interest rate of 2.95% to 29.95%.
AutoArriba
AutoArriba is another non-traditional lender that offers bad credit auto loans ranging from $3,500 to $49,500. They offer a loan repayment period of 12 months to 84 months and charge an interest rate of 8.99% to 29.50%.
Sparta Finance
Sparta Finance is perfect for those who are looking for high-performance and luxury vehicles because they offer bad credit auto loans with no limit. This means that you can finance any vehicle by paying an interest rate ranging from 3.9% to 34.9%. They have a loan maturity date of up to 240 months.
Conclusion
As you can see, there are many different ways to get a car loan with bad credit. Some of them are more expensive than others, but all of them will allow you to finance a car without having to worry about being rejected due to your bad credit.
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