Fixed rate loans are very appealing to the person with bad credit, because the rate can be set to the value that this person can afford. Under normal circumstances, a person with a bad credit would be expected to pay higher interest rates than someone who has great credit, which translates into much higher monthly payments. Having a fixed rate loan means the interest rate does not change.
Locking into a fixed rate loan is a positive approach during the time that you experience bad credit. Loan calculators are available to gauge the total amount that the person is required to pay back once they know the specific auto loan rates. For the most part, the fixed rate auto loan makes for a stress free borrowing experience for bad credit customers.
Once the person has been successful with the used auto purchase and this loan is reflected on their credit history, it will help to increase their credit score. If payments are made on time, the person could very well qualify for a loan refinance, which will lower the interest rates considerably.
While someone with good credit will be allowed to finance a vehicle over a considerable period of time, often in excess of 72 months, a person with bad credit will not be given such an option. It is more normal for the person with bad credit to be expected to finance their loan from one to three years. Because of this shortened period, interest rates will be much higher, which is a double negative for someone with bad credit. Fixed car loan interest rates certainly come into their own here.
The bad credit buyer will normally be expected to have a down payment of between 20% and 50%. Dealers who specialize in bad credit financing are cautious and not keen to lose their money. By demanding a higher down payment, these dealers have to some extent protected their investment, should the bad credit buyer default on payments.
Traditionally, buyers of vehicles make a single monthly payment. The bad news for buyers with bad credit, is that the dealership or lender probably will require payments to run concurrent with the person's pay cycles. This means that if the buyer receives wages every two weeks, they will be expected to make two monthly car loan payments.
Whether the bad credit buyer likes it or not, these are part of the terms that they will need to accept if they are to proceed with a used auto purchase. It is not all negative though, and the buyer can make use of a car loan payment calculator prior to the purchase, so as to gauge the exact amounts that they will be required to pay back and when.
Although terms and rates for the bad credit buyer are not as attractive as those presented to the person with good credit, the bad credit buyer is still in a position to purchase and finance a used automobile if they follow the steps above.