March 21, 2008, Newsletter Issue #70: Car Loans With Low Credit Scores
Tip of the Week
There are ways to get lower interest rates on car loans, even if the borrower has less-than-perfect credit. Don't accept the very first loan offered to you. It really pays to shop around a little to find the best interest rate. You should additionally consider paying the car loan back using an automatic deduction from your checking account. Oftentimes this will result in a lower interest rate as long as the automatic payment is maintained.
If your credit is exceedingly bad, you may want to consider having a co-borrower on the loan, preferably someone with outstanding credit. Having a co-borrower is not something that should be entered into lightly, however, because if you default on the loan for any reason, the co-borrower becomes legally liable to make the payments. That means if your father co-signs for you and you later lose your job and are unable to make payments, he needs to make the payments even if he never drives the car. Even though having a co-borrower can result in lower interest rates, you need to decide if it is worth it. In some cases, it may be better to simply accept a higher interest rate so you don't need to involve someone else in the loan.
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