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Do you have bad credit? Many of us have experienced having bad credit due to different reasons. You may have lost your job, your business was not successful, or you’re simply having trouble with your finances because of the economic crisis. Maybe you are just down on your luck at the moment and made some bad financial decisions. Whatever the cause of your bad credit, it should not prevent you from getting a loan. Why? Because there are many lenders willing to entertain borrowers with less-than-stellar credit ratings.
How to Obtain an Auto Loan When You Have Bad Credit
Loans for bad credit are typically offered to individuals with negative credit scores. These loans can be used for different purposes, such as for an auto loan, home loan, debt consolidation loan, and other kinds of personal loans. Each type of loan will have different requirements in order for you to obtain. It is important to verify what requirements are needed before submitting your loan application to a bad credit lender. When looking for bad credit loans, it is best to look online since most non-traditional lenders operate their business over the Internet.
Non-traditional lenders typically look past a borrower’s credit history and look at the current financial status to assess their affordability and eligibility. Lenders will want to make sure that they can get their money back. You should also remember that bad credit loans typically have higher interest rates than regular loans. But look at the bright side: if you are able to pay off your bad credit loan without any problems, it can help repair and improve your credit score.
Keeping up with the interest rate of loan repayments can be a challenge especially if they are high. There are things you can do though to address the problem and save some money in the process. One of this is to use a credit card to pay off your existing loan. There are introductory credit cards that offer 0% interest rates and they might just be the most ideal solution for your current dilemma.
In order to pay off an existing loan using a credit card, you must do a balance transfer. This is essentially moving your debt to another place to avail of a better interest rate. You will close the loan account and the balance is hen taken on as a credit card debt this time.
Before you go through with the transfer, check with your loan provider first to see if there is a way to get the loan paid off directly using a credit card to avoid balance transfer fees. If this is not allowed then you’ll have to do it through your credit card. Bear in mind that how much amount you’ll be allowed to transfer to your credit card is going to be limited by your line of credit so make sure that you have enough to cover the entire loan balance.
Advantages of a balance transfer
Perhaps the most notable advantage of transferring your loan balance to a credit card is the interest-free period. This will help you save immensely on interest assuming that you are able to pay the entire loan amount off by the time the 0% period is over. Erasing the debt in time is crucial though because once the credit card interest rates kick in, they will usually be significantly higher than your original loan’s APR.
There is also the added advantage of getting rewards for using the card. Most of the time, using a credit card for paying off a loan directly can lead to reward points or cash backs. That’s on top of the 0% interest that you will be enjoying.
There are risks involved as well. For instance, there is the usually high transfer fee. Often, this could range from 3%-5% of whatever amount you are transferring. This may be more than what you’d generally save on the old loans interest rate especially if you have the means to get the balance paid off fast. This is why you must carefully assess and sum up all these extra costs first before you proceed with the transferring your loan balance.
There is also the risk of not being able to pay the balance before the 0% interest period is lifted. This could mean interest fees that would be even higher than what the initial loan charges. So, you should only consider this option if you know you can pay off the balance on time.