Financial disasters can affect anyone – an emergency hits and family finances are drained in a matter of months leaving consumers awash in bills, late penalties, and collection calls. Fortunately, there are loan packages available for people struggling with bad credit, and people who are recovering from poor credit, that make it possible to not only buy a car, but rebuild credit reputations as well. Second chance car loans are offered by nationwide lenders and brokers and are marketed specifically to honest, hardworking consumers who need to restore their credit to what it was before financial disaster struck. The buyer must beware, however, as not all lenders advertising second chance cars are doing what they do out of the goodness of their hearts.
Second chance car loans come at a price. Lenders are unwilling to extend credit to anyone who poses an exceptionally high risk as a borrower. Where circumstances permit it, lenders will approve car loans for people with bad credit if those customers can show proof of income, a recent history of paying off debt, and no excessive new debt. Lenders charge a higher interest rate for these loans in order to mitigate costs to the lender in the event the borrower should default on the loan. There are usually fees charged for the loan and these cover the direct cost to the lender for making the loan. However, a reputable lender will not charge an upfront fee, but will make available, to the borrower, a list of all fees that will be attached to the loan.
There is a market in conning people with bad credit out of what’s left of their money. Many consumers who are searching a second chance in the car loan market are motivated, in part, by desperation. This makes them ripe for the plucking by shady dealers in car loans who tease the consumer with low interest rates, monthly payments, etc. Ultimately, the consumer finds him, or herself, in a car loan agreement stacked with fees, a variable interest rate that zooms up 10 points after the first year, and a loan term that lasts beyond the value of the car. These are auto loans that offer no chances at all and leave the consumer in a worse credit situation than he, or she, was before.
As a consumer goes about the business of choosing a lender, he, or she, must be aware of the total costs of the car in calculating the loan, especially if this loan is to be effective in rebuilding an individual’s credit. A car’s cost is more than just it’s sticker price. Its total cost includes taxes, fees, licensing and registration, and insurance. Depending on where the car is purchased, the total cost of a car can be several thousands of dollars more than what the consumer is expecting. By preparing for these costs in the beginning, the consumer can budget him, or herself, for a large down payment, at least 20%, which will help reduce the overall costs of the loan. Second chance car loans are tailored to consumers who are willing to take this step in committing to the auto loan agreement.
Second chances are welcomed by everyone. When times get tough, honest consumers only want an opportunity to rebuild what they once had. Second chance auto loans offer a path to that very goal by allowing the consumer to purchase a car, improve credit through timely payments, and expand the quality and diversity of credit accounts. Bad times hit nearly everyone. Some folks just need that second chance to turn bad times back into good times.