If you have bad credit, it puts you in a tough spot when you need to buy a new car. You may need a car to get back and forth to work. It's certainly more convenient to have your own car for grocery shopping and running errands. However, when your credit is bad, you'll have difficulty getting a loan. An alternative that might work for you is to buy a car under a rent-to-own program. Here's what you need to know.
Bad Credit Loans Are Dangerous
It's difficult to get a loan at all when you have bad credit, but if you can get one, then you'll probably have to take out a subprime loan. These are loans from companies that specialize in lending money to people with bad credit. Because of the risk they take, they charge a high interest on your loan. This makes your monthly payments higher.
To find a car in your monthly payment range, you may need to settle for a car you don't like. If you buy a new car with a subprime loan, you may end up with monthly payments you struggle to make on time. This can wreck your credit and lead to more financial problems.
How Rent-to-Own Is Different
When you rent a car, the company may not even check your credit at all. Of course, you'll probably need proof of income along with identification and references, but your credit history doesn't matter. The process is very similar to renting a vehicle like you do when you go on vacation. The difference is the money you pay each week applies to the cost of buying the car. You can keep renting it until you pay it off, but if you run into financial problems, you can return the car without damaging your credit.
The More You Know
You may have additional expenses such as a down payment and maintenance costs on the car. Be sure you understand the terms of your contract so are aware of your loss if you have to return the car before it is paid off.
While you'll lose all your equity in the car if you return it, you will have had use of the car the whole time, so it's the same as renting the car. You'll probably be given a choice of used cars rather than new cars, and it's likely you'll make weekly or bi-weekly payments rather than monthly.
Also, while you might have to pay more for the car than if you bought the same vehicle at a car lot for cash, renting to own is an ideal solution if your income is inconsistent or if your credit is bad. You don't have to risk a repossession harming your credit, but buying a car this way may not help your credit either, since sellers usually don't report rent-to-own payments to a credit bureau.
Getting a used car from a rent-to-buy lot can help you get on your feet financially when you're getting back in the job market or recovering from a bankruptcy. It's less risky than taking out a subprime loan, and as long as you make your scheduled payments on time, you'll have transportation to get where you need to go no matter what shape your credit is in.
Learn more about your options by contacting companies like Rent To Town Autos.