What should you know about bad credit auto loans or finance?
Bad credit auto loans can be explained as a past failure to keep up with your credit agreements. In this matter you won’t be approved for new credit. What that means is that you haven’t paid your previous credit amount on time, which in turn has adversely impacted your credit score (This is collected by companies called credit bureaus and compiled into a credit report.) This type of credit loan generally occurs if you have multiple cases of auto loans in a small amount of time.
What do you mean by credit?
It’s very easy to understand. Credit can be described as borrowed money that can be used to purchase goods and services when you need to. You can take credit from a credit lender or a financer and you agree to pay them back within the agreed time and with interest (finance charges). Generally, credit can be classified into four types:
- Instalment credit: In this type, you borrow a specific amount from a creditor and you agree to pay back the amount and interest in regular instalments for a certain period of time.
- Service cards: This is a type of agreement with a service provider. They can be anyone from your state electricity provider to your cellular phone service provider. With this agreement, you pay them on a monthly basis.
- Charge cards: In this type, you have to pay the balance amount on a monthly basis.
- Revolving credit: This type of policy has a maximum credit limit and you can use that amount. Afterwards, you will have to make a payment every month.
The adverse effects of bad credit
Bad credit loans generally lead to affecting your credit score in a negative way. And if your credit score is below a certain thresh hold you won’t be able to take up any loan till it has recovered. This means if you need emergency funds, you won’t be able to go to a bank and apply for a loan. Even if you get approved, it would be at a high-interest rate.
Now, you can fix your bad credit score by taking some steps such as
- Removing negative information from your credit report
- Add a new account and pay on time.
For more detail, get in touch with CIK Capital, we will be more than happy to help you.
