Making bad credit auto financing more affordable

How to save money on your next car loan even if you have poor credit.

Although interest rates charged by subprime auto lenders for bad credit auto financing are typically higher than those associated with typical car loans… there are ways that you can cut down on the interest charges you’ll end up paying for that loan.

Here at Federal Auto Loan, we know this to be true. We’ve spent years helping car buyers with credit challenges. It’s the reason is designed so that individuals with less than perfect credit can read up on subjects that can help them through the car buying and auto loan processes: such as how to reduce the total interest charges you’ll pay on a car loan.

Reducing the cost associated with interest

People with low credit scores usually have some issues shopping for, and comparing, interest rates. This is because lenders typically only loan indirectly through new car dealers. That being said, regardless of the interest rate, there is a way to cut back on the interest charges associated with a car loan.

For example:

If you finance a $20,000 vehicle at a 7% tax rate with non-taxable fees of $150 and a down payment of $3,000… the total amount you need to finance on the vehicle comes out to $18,550.
Financing that amount over a course of 60-months at an interest rate of 17% and your monthly payment comes out to around $461. In this example, the total interest that would be paid over the term of the car loan comes out to around $9,110. That’s a pretty hefty chunk of change!

By simply reducing the loan term to 48-months, the monthly payment increases to $536. And while that number is a little bigger than the previous payment number, it’s not an enormous difference. With this strategy, you also pay off the loan 12 months sooner. And by taking on a shorter-term loan, your total interest paid drops to $7,178.

Other benefits of reducing interest expense

In addition to reducing interest expenses, another advantage to reducing the loan term is the fact that it substantially reduces the period in which your car is worth less than the amount you need to pay off on the loan. In other words, you are reducing the amount of time that you are “under water” on your auto loan.

Further, if you make your loan payments on time, you will likely be able to qualify for a lower interest rate loan (refinance) one to two years down the road.

Lastly, by paying a little more, you’ll either have less negative equity – or possibly even positive equity – in your current vehicle when it comes time to trade it in for a new vehicle.

The bottom line

When financing a car, especially one with a high interest rate loan, do it for the shortest loan term that you can afford. Doing so will save you a significant amount of money. Further, by making timely payments on your car loan, you should be able to re-establish (or establish) your car credit faster.

One thing you should know is that here at Federal Auto Loan, we place applicants with lender-dealer partners that understand and have experience with a broad range of credit issues. They constantly work with poor-credit consumers and can offer some of the best chances for approved bad credit auto loans.

So if you need bad credit auto financing, and are ready to reestablish your credit, you can begin now by filling out our simple online car loan form.

Get on the road today.


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