Special finance car loans are loans for “special” buyers. Generally, people seeking this type of loan are individuals with poor or bad credit. If you have credit history problems due to repossessions, charge-offs, bankruptcy, slow payments, or divorce, this may be the perfect loan for you. No matter how many times you have been turned down before, there are lenders that are willing to lend to special buyers. The best way to find these type of auto lenders is to search online. Applying for a car loan online is easy, and can save you a great deal of time. If you are embarrassed about your credit situation, applying online can also save you the embarrassment of having to explain your situation in person.
Conditions of Special Finance Car Loans
Whether you are looking to finance, or refinance, a vehicle, there are special finance car loans available for both of these situations. If you are considering this type of loan, you should be aware that lenders consider these types of loans high-risk, so there may be very strict guidelines that must be followed to receive the loan.
Restrictions on Special Auto Financing
Since most lenders consider special finance auto loans high-risk loans, they often impose very strict terms for the loan. These restrictions can include, but aren’t limited to, very high down payments, extremely high-interest rates, and little or no grace periods.
Down payments for a special finance car loan can vary between 5% and 26%. The reason lenders will require such a high payment is because they want the borrower to be fully vested in the car. The belief is that when a purchaser is really invested in a new purchase, they will do everything they can to protect that investment, which means making sure the loan is paid timely.
The high-interest rates required for these types of loans are to ensure that the lender protects themselves if the borrower defaults. It is important to note that special finance auto loans are often thought of as ways to re-build credit history. If you maintain your monthly payments the way you are supposed too, you should be able to refinance the car with a traditional loan at some point. So, even though the interest rate on this type of loan is high, it doesn’t have to be a long-term solution.
The Importance of Paid-as-Agreed Loans
If you receive a special finance car loan with little or no grace period, it is very important to make your payments on time. Late payments will not only hurt your credit history, but it will also cause you to incur higher interest accumulation, which means you will end up paying more for your car.
Lenders realize that anyone can experience credit problems at some point in their life. However, many people deserve a second chance. While special financing auto loans may not seem like an ideal situation for you, it may be your best chance to re-build your credit, and prove your credit worthiness. Online you will find many companies that will accept your auto loan application, and then match you with appropriate lenders. This type of service is a great way to utilize your time, and get you the car loan that you need now.