A guarantee auto loan is another type of loan that will render an amount of money that will be used for purchasing a car for a client with a bad credit history or for those who only have minimum income. These conditions might make it difficult to find a lending institution willing to finance a car purchase but guarantee auto loan, as its name implies, will be the best option that these individuals have. Though it may sound like an easy type of loan to handle as compared to traditional financing, guaranteed loans may come with a lot of hidden disadvantages. However, if the following terms are met and payments are on time, then positive credit may be ahead for the debtor.
With every type of loan, the first charge that an applicant must look for is the deposit rate. When it comes to this aspect, a guarantee auto loan can be scored poorly on the view of the applicant as it requires a huge amount upfront in general and will depend on the car to be bought. The range of the usual down payment will be $1,000 to $2,000 for a regular car or around 5% to 10% of the total price of a certain car. However, with a guarantee car loan, it ranges around $4,000, double for regular cars or 20% of the total amount. Finding a lending agency without such deposit rates might be difficult.
As for interest rates, the figures are no better. Because the usual applicants of guarantee auto loans are those with a bad credit background, interest rates are expected to be high in general. Though some institutions may leave room for negotiation, this type of loan does not allow it or very rarely does exempt applicants. There might be a good chance that the creditors will listen to the applicant if he or she has a slightly better rating. As with all types of loans and any lending institution, the credit rating will be one’s weapon to use for bargaining a deal that provides some advantage for them thus it is important to take care of it before entering any new loan. The regular monthly interest averages from 10% to 12% but interest rates for guarantee auto loans have soared to more than 12%.
Finally, guarantee auto loan late payment penalties make that of regular car finance terms seem better as it can be as hefty as a $200 fine when the average fee is only $10 to $20. This type of car loan must only be taken if the applicant knows very well what it is, how it works and if he or she is capable of complying financially to the agreement.