Guaranteed Car Credit Loans Explained

Many establishments are now offering guaranteed car credit loans to their customers. These car lots are letting it be known that they guarantee to provide a loan to anyone that wants a car. Here are the basics of the guaranteed car credit loan and how it works.

What They Are

These types of loans are commonly offered in the used car industry today. You will see advertisements for them on TV and roadside billboards and will hear loud radio ads for them. Most of the ads say something along the lines of "Bad Credit OK" or "We Will Finance Anyone!" With this type of program, it does not matter what your past is. You will be able to get a loan for a vehicle.

Ignoring Traditional Standards

Typically, whenever an individual wants to get a loan for a vehicle, he has to meet certain qualifications. For example, he will need to have a certain credit score, sufficient income and steady employment. With the guaranteed credit loan, these things will not matter. They may look to see if you have sufficient income, but some of the lenders will not even verify that.


Many people wonder how they can possibly offer a program like this. Basically, it comes down to probabilities. The companies that offer these types of loan programs use a lot of detailed calculations to come up with the probability that a customer will default. They look at historical data to see what percentage of bad credit customers actually default on their loans. The lender will then increase the cost of the loan so that they can cover a certain amount of default. The money from the customers that continue to pay their bill will cover the ones that do not.

Interest Rates

Although this type of loan can provide you with access to a vehicle when you need one, there are some drawbacks that you should know about. One of the biggest drawbacks is the high interest rate that you will have to pay. These loans always have high interest rates associated with them. In many cases, you will pay two or three times as much in interest as you would have if you would have been able to work with a regular lender. This means that if you can avoid this type of loan in any way, you should take the steps to do so. However, sometimes it is not possible to get a loan in any other way.

Rebuilding Credit

Even though you will be paying higher interest, this type of loan can help you rebuild your credit. When you regularly make your payments on time, the lender is going to report this to the credit bureaus. Regular payments are one of the best ways to rebuild your credit score. Therefore, in the future, you may be able to get credit from another lender besides a guaranteed credit lender.

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