Bad credit literally means poor credit rating. In the financial industry, bad credit is used to describe someone who is considered "high risk" to financial companies and lenders due to bad history of mortgages, loan, utilities, and credit card repayments. For a layman, bad credit means inability to acquire future loans or to get reasonable interest rates on loans. This brings us to the question: Is car finance with bad credit rating an ideal thing to do or will this action brings you to your knees?

Having a bad credit rating has several negative implications. One, as mentioned a while ago, there is a chance that your car loan will be rejected; you cannot even get a loan at all. Two, creditors that accommodate bad credit score holders usually tend to shorten the term of the loan, increase the interest rate tremendously, or both. And three, since you are a "high risk" borrower, the dealer may give you a much higher figure than the car's real value.

Assuming a lender approved your bad credit car loan (since there are several loan agencies that specialize on bad credit loan application), it is still not the end of the story. You still have to pay back what you have borrowed plus interest. A good credit rating holder can get a car finance paying as little as 10% on down payment at a good rate for as long as 7 years amortization. Bad credit score holder (depending on how bad the score is) may be limited to 2 to 4 years amortization with an interest rate that ranges from 5% - 26%. Not only that; the down payment can go as much as 50%.

The 3rd consequence mentioned goes like this: Suppose the current market value of the car you want to buy is $5,000. Since you have a bad credit rating holder and the finance company sees you as "high risk" borrower, the dealer may artificially inflate the price of the car you want to buy to $7,000. All these may sound absurd but they actually happen.

All these can force you to default payment and can certainly ruin your credit rating further.

Since you are at the mercy of these lenders, there is nothing you can do and settle for what is offered, right?

Wrong!

Now your know what bad credit car financing can do to you, it is time to think about whether or not bad credit car finance is still worth a shot. Sure, you want to own a car and you want to own one fast but think about the future implications? Are you ready to pay an outrageously high interest? Are you willing to sacrifice a big portion of your monthly income paying for a car that does not worth its use at all? If the amount of the car you carry can bring you down to your knees, then better throw it to the ground and start standing on your both feet straight again.

The best way to avoid the implications of bad credit car finance is not to take it at all. Start rebuilding your rating first before considering owning a car, be it a new or used one. Adding another financial responsibility in the form of a car loan will not do the trick. Get an accurate credit report. If there are inconsistencies, report it immediately to get it fixed. Manage your finances first. Set a budget wherein you can pay your current bills on time. Paying on time help you build a good credit reputation.

Rebuilding your credit rating is not an overnight process. It may take you several months, even years depending on the progress you make but the price is all worth the effort. Sacrifice your craving for a car. Set it aside and focus on your credit rating. Once you have improved your score from bad to good, do not stop. If you think you can get a more competitive rate on car loan, then a month or two worth of waiting and improving will certainly not hurt. Be persistent! Before you know it, you can get a car without paying too much interest rate.