What is a Bad Credit Car Loan?

For those individuals with poor credit, the bad credit car loan can be a lifesaver. However, even though it is known as a bad credit car loan to some, it isn't generally referred to by that name. To lenders, it is acknowledged as a car loan, even if it is reserved for car buyers with bad credit.

In general, a bad credit car loan will cost an individual more over the life of the loan than a good credit car loan. The interest rate and fees are generally higher for individuals who have bad credit simply because the individual poses a credit risk for the lender. Depending on the extent of the individual's credit, the ease of obtaining this type of loan can be somewhat limited.

In order to qualify for bad credit car loans, the borrower must be able to show a steady source of income, typically from some type of employment. The debt is secured with the purchased vehicle as collateral. In the event that the borrower cannot make good on the bad credit car loan and fails to repay the debt, the lender can seize the vehicle and sell it to recoup their loss.