How to save money on your next car loan even if you have poor credit

Knowing the answers

While the higher interest rates charged by subprime auto lenders means this kind of auto loan will be more expensive, you can still cut down on the interest charges you'll pay.

We can tell you this because at Auto Credit Express we've spent over twenty years helping out credit-challenged car buyers. We even designed a web site so individuals with less than perfect can read up on subjects such as child support income and repossession along with today's topic: how to reduce the total interest charges you'll pay on an auto loan.

Reducing interest expenses

People with low credit scores usually can't shop to compare interest rates since these lenders typically only loan indirectly through new car dealers. But regardless of the interest rate, there is a way to cut back on the interest charges.

Quite simply, the interest expenses can be reduced by decreasing the loan term. While doing this will increase the monthly payment, it can dramatically decrease the amount of interest charged to the loan.

Here is an example:

If you finance a $15,000 vehicle at a 7% tax rate with non-taxable fees of $120 and a down payment of $2,000 the total amount to finance comes to $14,170.

Finance that amount for 60 months at an interest rate of 18% and the monthly payment should be about $360 per month. In this case the total interest paid over the loan term works out to be $7,419.

By reducing the loan term to 48 months, the monthly payment rises to $416 – but think of that as just $2 more per day.

But here comes the good news. The total interest paid drops to $5809 – a decrease of over $1600, which works out to $33 per month.

Other benefits

In addition to reducing interest expenses, another advantage to reducing the loan term is the fact that it substantially reduces the period in which your car is worth less than the payoff amount.

This means that when you're able to qualify for a lower interest rate two years down the road - which is very possible if you've made your payments on time – you'll either have less negative equity or possibly even equity in your current vehicle when it comes time to trade it in.

The Bottom Line

When financing a car and especially one with a high interest rate loan, do it for the shortest loan term that you can afford. By making timely payments on it, you should then be able to establish your car credit even more quickly.

One other thing you should know is that Auto Credit Express places applicants with dealers that understand a broad range of credit issues and can offer them their best chance for approved auto loans.

So if you're ready to reestablish your auto credit, you can begin now by filling out our online car loans application.