When you need to finance a vehicle with bad credit, you have to face an unavoidable fact: bad credit car loans come with higher interest rates. While this makes them more expensive than traditional auto loans, there are ways you can reduce the cost of your car loan. Just follow these tips.

1. Be Cautious with Your Vehicle Choice

reduce the cost of your car loanThe vehicle choice is perhaps the most important decision buyers with imperfect credit make when it comes to influencing the cost of their loan. Here's a "no duh" statement for you: the lower the cost, the less money you'll end up spending on your loan.

This means you can save a lot of money simply by choosing an affordable vehicle. Subcompact, compact or midsize cars are better choices than trucks, vans or large SUVs. Not only do they come with lower price tags, the average costs of owning and operating smaller vehicles is lower as well.

Things like insurance rates, the amount you spend on fuel, depreciation losses, and maintenance expenses all tend to be lower with smaller cars compared to those bigger vehicles.

If you have poor credit, it pays to be practical with your car choice. By choosing something affordable and reliable, you can more easily improve your credit situation. This means you'll want to avoid larger cars, look closely at used car options, and make sure your car payment is less than 10-15% of your monthly income.

2. Keep the Loan Term Short

If you have bad credit, you also shouldn't consider a long-term loan, as a shorter loan term will help you lower the overall cost of the loan. That's because the length of your car loan plays a huge role in how much you end up paying for your vehicle.

Especially with the higher interest rates attached to these loans, the longer the loan term, the more in interest charges you'll end up paying. But the opposite is also true, which means you'll want to focus on keeping the term as short as you can afford.

Here are three more tips to keep in mind: know your budget before beginning your car search; stick to your guns and don't allow yourself to get talked into a more expensive vehicle; focus on the total cost of the loan as opposed to the monthly payment.

Tying into the first point, choosing an affordable vehicle is an easy way to keep your monthly payment manageable even if you take out a shorter loan. Those two things work hand in hand to help you save money.

3. Provide a Down Payment

One more way you can reduce the cost of your car loan is by making a down payment. If the cash you are able to provide is significant enough (more than 10% of the car's selling price), it can help you save a lot of money down the road.

How? A down payment works to offset the higher interest rate.

The more money you are able to put down, the less you'll need to borrow. If you lower the amount financed, you reduce the interest charges that accumulate over the life of the loan.

In addition, having a down payment can make it easier to shorten the loan term. Because it reduces the amount financed, lowering the loan term at the same time doesn't make the monthly payment as expensive.

For these reasons, you are going to want to have a down payment.

The Bottom Line

The goal when financing a car with bad credit should be to get the vehicle you need while getting the chance to improve your credit through on-time loan payments. How you go about financing a car can make a huge difference in the overall cost of the loan. This advice can help reduce your overall loan costs.

One more thing: if you have imperfect credit and are struggling to get approved for a car loan, it's time to try Auto Credit Express. We connect car buyers to local dealerships that specialize in helping people in unique credit situations.

Get the process started right now by submitting our secure car loan request form.