The American way of life is inseparable from cars and trucks, and if people can’t muster up the funds for an outright purchase they would not hesitate to try car and truck loans. But the situation can change dramatically with a poor credit background because lenders can play hooky and you could find yourself desperately searching for alternatives. Even if you suffer the burden of poor credit ratings, there are bad credit car loans that roll the dice in your favor. But if you are not careful there will be lenders out there waiting to take you for an expensive ride.

Lenders tend to exploit you if they sense that you are desperate enough to take any loan offered. To avoid that scenario try to understand the bigger picture regarding your credit rating and concentrate on what you can do to remove bottlenecks.

Get your hands on your latest credit reports. The three top agencies in the country are obliged to release to give you a free report every year. If you go through you will discover useful guidelines explaining what you can do about credit report drawbacks and the strategies you can adopt to regain good ratings.

There’s another reason to check your free credit reports: you may find mistakes in your credit reports that, if fixed, will help boost your credit scores. Try giving yourself a time span of at least one to two months to rectify credit report errors before you research the market for car loans. One point to be careful about is not to approach too many lenders at the same time as the number of times your report is pulled out for lender verification can reduce your rating.

Techniques you can adopt to reduce auto loan costs

  • Don’t extend repayments beyond three years: Three year repayment schedules bring you attractive rates of interest more suited to your budget, and repayments beyond that period will do just the opposite. Besides, why should you pay more for your loan? Your aim should be to clear the loan faster.

  • Buying a new vehicle will be cheaper and more productive: generally, used car loans will be more expensive than new car loans, unless you get a really good rate on a well maintained used car.

  • No point loading up the extras: You will be sorely tempted by sales talk to make provision for rust proofing work, repainting and many other jobs but it makes better sense to get these jobs done separately from your own savings instead of adding to your repayment burden.

Bad credit loans are OK if you can avoid these common pitfalls:

There are skillfully designed debt traps that compel car loan borrowers to shell out more money than they would have anticipated.

  • Loan markups may increase debt burden of the borrower: Surveys reveal that the majority of car loans are sourced through dealers but the price you pay is adding the burden of dealer costs to your loan repayment. Satisfy yourself that mark up costs are reasonable before you sign the dotted line.

  • You have to dodge the Yo-Yo scamming tactic before it hits you: In such a scam the dealer allows you to take possession of the car by signing minimal paperwork and then recalls the car stating that he can’t extend finances on the agreed terms. The result, if you capitulate, is a loan that is dearer by 3 to 5 parentage points.

  • Loading extras into the loan package: This is favored tactic where the dealer compels you to load extras like credit insurance and rust proofing works to your loan amount selling you the idea that you don’t have to pay for this now. This actually works against the borrower as he lands up with an inflated loan amount that requires him to pay money in multiples of what he has actually spent on the vehicle.

  • The “buy now, pay later” kind of dealers: Usually people with very poor credit records are targeted in this approach where the dealer approves a loan quoting usurious interest rates that can never be paid by the borrower – the result is loan default quickly followed by car repossession.

Your credit rating is the Prima Dona that attracts that has the potential to attract the most favorable terms so it would be worthwhile to try and improve your rating to the extent possible before you get a car loan approved.