Bad Credit Car Loan Pitfalls to Avoid

Oct. 22, 2009 - PRLog -- A bad credit car loan is a phenomenon that has enabled bad credit borrowers to achieve their dreams of owning a car. However, one must exercise caution when looking for that loan because some unscrupulous lenders seek to take advantage of borrowers. In this article I discuss some of the pitfalls to avoid when looking for bad credit car loans (http://www.capitalcarloans.com).

Companies offering bad credit car loan (http://www.capitalcarloans.com) follow the same system as those offering good credit auto loans except that they will require that people with bad credit give a bigger down payment and pay a higher rate of interest. Down payment can vary between 20% to 50%and interest rates, 5% to 26% depending on how bad your credit is. Avoid paying more. For example, a borrower offers his car as collateral for a short time loan with an effective interest rate of up to 144% per annum. These loans, also called title loans, come with an interest rate of 12% per month so when the borrower is unable to pay; another bad credit car loan at 12% has to be taken. Such lending if not downright illegal is very imprudent to accept.

Some lenders artificially inflate the prices of the car and or the rates of interest charged for the loan. In such a situation, the borrower is exposed to the possibility of defaulting on the loan thereby ruining their credit further. Your best protection is to investigate the true value of your desired car and endeavor to only pay the wholesale value plus a little extra as profit for the dealer. Also look out for large rebates and extra ordinarily low introductory rates as the dealer may later on put a large price tag on it

Borrowers should also look out for bad credit car loan (http://www.capitalcarloans.com) that has been pre-computed as the rate of interest on the loan is calculated in such a way that every time you pre-pay or sell your car, the result is that you pay more towards the interest while paying  less for the principal amount than you should.

It is imprudent to take out a large or long loan as you will be bound to pay a high rate of interest on a rapidly depreciating car. The best car for you would be a moderately new; meaning 2-3 year old car, as you will not need to pay a lot for credit or auto repair work.

Obtaining a bad credit car loan (http://www.capitalcarloans.com) is a great way of ensuring that you become a car owner despite poor credit. With the above tips you can avoid the common pitfalls and drive away smiling.

Capital Car Loans is your best source for new car loans or bad credit car loans online. If you have really bad credit, bankruptcy, poor credit or a low credit score we have car loan credit programs that can provide financing with low interest rates that will help you buy the new car you really want at payments you can afford. More information about Capital Car Loans can be found at http://www.capitalcarloans.com.

# # #

Capital Car Loans is your best source for auto loans or bad credit auto loans online. More information about Capital Car Loans can be found online at http://www.capitalcarloans.com.