Elements of an Auto Loan
The amount of an auto loan is determined by the price of the vehicle minus your down payment. The other components of a loan are the interest rate charged, or annual percentage rate(APR), and the length of the loan. As the interest rate goes higher or the length of the loan is shortened, your monthly payment will go up. So you need to decide what monthly payment you can afford.

What Can You Afford?
It always good to be sure you have an auto loan you can afford and especially if you have bad credit. If you don't know what's affordable for you, a good rule of thumb is to have a payment no more than 20% of your monthly spendable cash. Your spendable cash is your income minus all your monthly living expenses. Be sure to include with your expenses the vehicle's insurance, gas, and repairs costs.

When getting auto loans with bad credit, it's important to know the reason for your credit rating. If your poor credit is the result of being late on your bills, it may be possible to immediately improve your situation. Talk with a credit counselor about working out a repayment plan. For when lenders see you're taking responsibility for your debts, they'll be more inclined to make you a loan.

Another Consideration
When lenders make auto loans to people with bad credit, they charge a higher than average interest rate. Be aware that besides creating a higher monthly payment, high interest rates also mean you're paying more for the car. So if you sell the vehicle before the loan is paid off, the price you get will probably not cover the balance of the loan. Likewise, if the car is totaled in an accident. Your insurance would only pay the used car price, not how much was left on your loan.

What are Your Bad Credit Auto Loan Options?
No matter what your credit looks like, your best weapon for getting financing you can live with, is to rely on competition. Even if you get your auto through a dealer, contact banks, credit unions or any membership organization you're a part of. Also car dealers will sometimes offer reasonable financing on certain models if you accept their price.

Cash always talks in financial dealings and when you're looking for auto loans with bad credit, cash talks very loudly. A large down payment not only makes it easier to get a loan, but also does more for cutting your monthly payments than a lower interest rate. Expect to pay a minimum of 10% down and 20% or more will get you better terms.

If your credit situation is such that you can't get a loan on your own, you might try using a cosigner, such as a friend or family member. Since a cosigner is jointly liable for the loan, you may want to compensate them in some way.