Getting an auto loan with bad credit can certainly be daunting, but it is not impossible. However, you need to know what to expect, and how to spot the abuse of bad credit buyers when you are the dealers.

Depending on how severe your credit problems are, you are usually required to leave higher down payments and have higher interest rates. This in itself is normal for people trying to get an auto loan with bad credit, but you need to watch for the practices of outright thievery that many dealers try pull over on you. In most cases, people with trying to get an auto loan with bad credit should expect to pay between 7% and 18% in interest rates. Loans are usually offered for 2 to 4 years as opposed to 5 or 6 in cases with good credit.

If you are going to a dealer that works with banks outside of the dealership, then there are laws that govern that type of transaction. However, if dealers use their own in house companies to finance auto loans for people with bad credit, then you need to be aware of certain practices that are in place to deceive you.

What they sometimes do is artificially inflate the price of their cards, or the interest rate that you are being charged. They take a car that would normally sell for $5000.00 and inflate it to $7000.00, and then take the down payment of $2000.00 and finance the balance for between 24% to 26%. You are not only paying very high interest rates, but with the inflated value of the car, along with the interest rates, your auto loan bears no realistic value of what the car is actually worth. Chances are most people taking out these kind of auto loan with bad credit will end up defaulting on the loan and ruining their credit more because of the astronomical monthly payments in which they pay almost triple what the car is worth.

When you apply for an auto loan with bad credit you need to be knowledgeable about what the car is actually worth plus a small profit for the dealer. Only very rare cases require paying more than what you should for the retail price of the car.

Jim Fisher is a financial advisor and specializes in the fields of auto loans

Source: www.articlesbase.com