Buying an automobile is often a necessity rather than a luxury. The freedom you gain from owning your own vehicle is unmatched. Additionally, public transit isn’t an option in all circumstances, which makes owning a car increasingly necessary.

Whether you’re commuting to work, running errands, or enjoying family road trips, reliable transportation can greatly impact your daily life. Unfortunately, many potential drivers today face bad credit scores, which leaves them wondering how to obtain a car loan. If this scenario is familiar to you, our NJ State Auto Used Cars team has good news. We not only help you with a large inventory of dependable cars, but we also offer bad credit car loans in Hudson County. Keep reading to learn more.

Understanding Bad Credit Car Loans

A bad credit car loan is exclusively for drivers with low credit ratings, usually less than 600. Traditional lenders, such as banks and credit unions, may hesitate to offer loans for those with bad credit because of the perceived risk of default. However, bad credit auto loans give you the chance to get the vehicle you need, even with a less-than-perfect credit history.

These loans often have higher interest rates to compensate for the risk that the lender is taking, but they provide a chance for drivers who would otherwise be unable to obtain funding. While the increased interest rates may make the loan more expensive in the long term, these loans help you gain access to transportation while also providing an opportunity to rebuild credit through careful financial management. Some of the key features of these loans include the following:

• Higher Interest Rates: As mentioned, lenders offer higher interest rates due to the increased risk of lending to those with a lower credit score.
• Shorter Loan Terms: Some bad credit loans have shorter repayment durations, which help the lender reduce risk but may result in higher monthly payments.
• Lower Loan Amounts: To reduce their risk, lenders may give a smaller loan amount, limiting your automobile options in some cases.
• Secured Loans: The majority of bad credit car loans are secured by the vehicle itself, which means that if payments are not made on time, the lender may repossess it.

If you’re wondering if you might be eligible for this type of loan, our team can help you explore your options, but the following are a few conditions that typically apply:

• Lower Credit Score: Low credit scores are typically below 600.
• History of Financial Issues: Past financial difficulties, such as bankruptcy or foreclosure, can open these options to you.
• Limited History: Rather than poor credit, you might have limited credit, which could make you eligible for certain loans.

Understanding How Bad Credit Car Loans Work

Bad credit vehicle loans work similarly to standard auto loans. The first step is to complete the online credit application on our website or stop by and talk with our team. We have years of experience assisting drivers in finding the right car and loan for their needs, which also means we have a long list of lenders willing to help. If you’re applying online, you’ll see that our form does not impact your credit score like other applications might, which is a bonus when you’re trying to keep inquiries to a minimum.

Once you’ve completed the form, we will confirm that all the necessary information is included and then send it to our lenders to evaluate your options. The application asks for basic information, but if you’re unsure about an answer or have questions for our team, we’re happy to help. Something else to note is that our pre-approvals are good for 30 days, which gives you time to test-drive vehicles to ensure you find the right one for your needs.

When we receive notification from one or more lenders that you’re approved, we will review the terms of the loan with you, including things such as the interest rate, loan amount, and repayment duration. Used vehicle loans are normally set for a 24- or 72-month repayment plan, but some last longer. One key thing to consider when applying for a bad credit loan is your ability to repay the loan. Since the car you buy will serve as security for the loan, you want to ensure you can easily make the payments so you don’t lose it.

How Does a Bad Credit Loan Help Drivers Rebuild Credit?

Not only do you get the freedom of owning your own car, which lets you take your kids to the park or Liberty Science Center, not to mention making it easier to get to work and back home again, you also get a chance to rebuild your credit through a bad credit car loan. This is because on-time payments create a positive payment history, which is one of the most important variables in determining your credit score. Every payment you make towards your car will be reported to credit agencies like Experian, Equifax, and TransUnion. Consistent, timely payments reflect financial responsibility.

Additionally, a bad credit car loan might diversify your credit profile, which can also improve your credit score. Your credit mix, which is the number of credit types you have, such as credit cards, installment loans, and mortgages, accounts for approximately 10% of your credit score. Adding an installment loan, such as an auto loan, can improve that mix. This, along with the on-time payments mentioned above, creates a positive track record that makes it easier to get credit in the future.

Finally, a bad credit car loan might also reduce your dependency on revolving credit, like credit cards. Maintaining low credit card balances and keeping your auto loan in good standing contribute to helping you lower your credit utilization ratio, accounting for 30% of your FICO score.

Shopping with Our Team

Now that you know how a bad credit car loan can rebuild your credit, you might wonder how else our team can help. First, we have a number of cars available, from compact, fuel-efficient options to help you navigate your commute along I-78 to family-friendly SUVs. You can check out our inventory online or stop by and talk with our team. One thing you’ll notice right away is that customer service is our priority. We know that shopping for a car can be daunting in general, but it’s even more so when your credit is in question. With this in mind, we take the time to truly understand what you need and help narrow our selection down to provide you with a stress- and hassle-free shopping experience.

We also make it easy to connect with us us. When shopping online, you can click the “text us” button, and a member of our team will respond as soon as possible. Of course, you can also meet with us in person every day of the week except Sunday. We’re even open late to accommodate your schedule.

Take the First Step Toward a New Vehicle

A bad credit auto loan is a great solution for drivers who need a car but have less-than-perfect credit, especially when you understand how these loans work and how they can help you rebuild your credit. The key is to work with a reliable team that can not only help you get the credit you need but also has a large selection of vehicles to choose from to ensure you find the right one for your lifestyle and needs. Taking public transportation won’t always get you where you need to go or when, but our team can help you get to your destination with ease. Stop by and talk with our NJ State Auto Used Cars team today to take the first step toward owning a new vehicle.