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For many Americans, it may seem impossible to get a car loan when you have a bad credit rating. However, there are banks out there who are willing to give people loans. Most of them aren't the big institutions you hear about on the news, but rather they are the small local banks and credit unions who managed to avoid this big financial mess.

Most of these smaller banks have strict lending requirements, but if you have a bad credit rating you can still get a loan, they will just charge you a higher interest rate. The reason smaller banks and credit unions will give people with bad credit a loan is because they have no other way of making money right now. With interest rates as low as they are, and their investments down the drains, loans are the only way these banks can make money.

There is money to be had and loans to be made in this environment, but the problem with the credit market is that people just don't feel comfortable purchasing a big ticket item right now. Despite what you may have heard on the news, the credit market hasn't completely dried up, there just aren't enough people out there with quality credit scores looking for loans. Banks have money to loan but no one wants to borrow. I've seen financial institutions with auto loans as low as 4.25% for people with sub-prime credit and 3.75% for people with A credit. The money is right there sitting on the table but no one is there to pick it up.

Part of the problem is that people keep dwelling on these big lenders who for the most part could care less about making a car loan. Institutions like WaMu and Citi make more money in business and mortgage lending which makes auto loans low priority. This can be clearly seen in the interest rates offered by these larger institutions some as high as 7.48%. These are the companies that have been hurt by the Real Estate market and are tightening up their standards.

My suggestion, if there is anyone actually looking to buy a car right now, look at your local financial institutions, your community bank and credit unions. These guys are really struggling right now and auto loans make up a significant part of their loan portfolio's. Their problem is actually about to get worse due to the drop in interest rates.

This is a summed up version on how banks work: banks make money through loans and investments, if no one is borrowing money from them then they put their money in investments. If interest rates are low they won't be getting a good return on their investments, so they'll have to lower their rates to try to make some loans.

So the bottom line is you can really get a good amount of cash if you need it, you just have to know where to look. You may not find loans as low as 3.75% but you'll definitely be able to find a loan. This holds true for personal unsecured loans also, if you're willing to pay a 12% interest rate but hey thats much better than the 24% you're paying on your credit card.

Learn more about this author, Daniel Cote.
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