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Why Restrictions On Bad Credit Auto Loans

When the bad credit auto loans were introduced, many applicants rejoiced the fact that they are going to be approved for finances even with their poor credit history. However, ninety percent of the lenders at that time had a lot of restrictions over the loan amount, the loan term, the interest rate and all the other things. The situation has changed with the increase in competition but one can see that most prominent dealerships and lending institutions, which are popular for good lending, also have restrictions on bad credit auto loans. People always wonder as to why these restrictions are and the following lines tell why.

The first restriction is that the amount of the loan isn’t as high as the amount of the conventional loans. This means that one cannot go for a new model or a flashier car with bad credit auto loans. This is done to keep the installments to a more affordable level and to ensure that the borrower can pay back the loan easily. Another restriction that dealerships put is that the applicant doesn’t get a lot of car options to choose from. This means that that if he/she wishes to buy an expensive car or a new model, then chances are that he/she would be refused or the loan would be rejected. The reason behind this is again due to the higher cost of the new models. Moreover, some dealerships try to sell their slow moving models on bad credit auto loans due to which they restrict other options. This allows them to get rid of the model without selling it on rebate or zero finance and by selling them on bad credit auto loans they are actually making more money.

Hence, it all depends on which dealer or lender the applicant has contacted for bad credit auto loans. If the lender is proficient, then chances are that he/she would restrict for the user benefit only.

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