ABC's of Car Loans

Before you apply for bad credit car loans, learn the basics of car financing. We'll explain the fundamentals of car financing and bad credit car loans.

About Bad Credit Car Loans

Bad credit car loans serve the same purpose as traditional car loans, but they are intended for a different consumer demographic. Typically, if your credit score falls below 620, you would be considered a "subprime" borrower. This means you represent an added risk for lenders, which they will compensate for by either not lending to you or charging higher rates. If you fall into subprime territory, you can still qualify for financing that does not have outrageous rates with our bad credit car loans. Because different lenders assess risk in different ways, it behooves subprime borrowers to shop around for at least two or three quotes on bad credit car loans. On our site, we provide at least four quotes to you for free, so you can rely on us as your one-stop-shopping destination for bad credit car loans.

Four Components of a Car Loan

Whether you're applying for bad credit car loans or traditional loans, your vehicle financing deal can be broken down into four basic components:

1. APR (annual percentage rate) - the APR represents the total annual cost of borrowing. Not only does APR include the loan's interest rate, but also all up-front and ongoing fees and charges. APR is the most valid and reliable way to compare bad credit car loans.
2. Up-front charges & fees - you will usually incur some out-of-pocket expenses when you first take out bad credit car loans. Such initial costs might include origination fees, application fees, and/or processing fees. These are expenses you will need to pay up-front before you finalize the loan.
3. Loan's total cost - the total cost of the loan takes into account all of the monthly payments you will make over the loan's term in addition to any charges and fees. This is an important figure to consider when applying for bad credit car loans because it takes into account your interest expense over time.
4. Prepayment options & penalties - though you may not have any intention of paying your loan off early now, your financial situation might change or you might wish to refinance, which would require you to exercise your prepayment privileges. Make sure you know if your loan allows you to pay it off prematurely, and, if so, what kind of a penalty you will be assessed for doing so.

Examine our car loan tips on the next page.