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For the financially challenged or people with bad credit, there are a few alternatives to car financing with bad credit. Individuals who do not qualify for a low interest car loan should steer clear of a car dealership. The ultra-low rates offered by dealers are usually marketing ploys.
Low interest rate financing targets consumers with a permanent address, a stable job history coupled with a good credit standing. Unfortunately, customers with a tarnished credit rating may be limited to high-risk financing from a used-car dealer who specializes in sub-prime financing (unconventional loans). Moreover, certain sub prime car financing may expand into bills where the consumer owes more than the value of the car.
For the indebted, 'buy here-pay here financing' is a growing new trend. These high interest rates for used cars can serve as the only alternative for people who require transportation but do not qualify for conventional or prime financing terms. Additionally, high-risk buyers or poor credit consumers have to meet a higher down payment requirement. In many cases, the down payment for a lower-end used car usually covers the full amount of the vehicle, leaving the remainder of payments as total profits for the car dealer.