What is a buy here, pay here car dealer? Here’s what to know about this last resort for buying a car.

Quick facts about buy here, pay here car loans: The shaky economy is leading to higher interest rates and tighter credit. That is, at least for now.

BHPH dealers shouldn’t be your first choice for buying and financing a car. However, they perform a service for borrowers who can’t secure a traditional loan. You won’t be driving a top-tier vehicle, nor will you get a bargain interest rate. However, BHPH dealers specialize in making loans to borrowers unable to get financed anywhere else.

If you search hard enough, you may find a traditional car dealer that offers BHPH on its used car lot. It may not advertise as such. However, phrases like “We Finance” or “Rebuild Your Credit” on signs or written across the windshields of some of its inventory might indicate that it underwrites some of its own financing.How does buy here, pay here work? A few significant differences exist between the experience at a BHPH dealer and a traditional dealer.

Tip: Before signing anything, determine what the dealer’s policy is on late payments and ensure it’s stated in the loan agreement. How buy here, pay here affects your credit Your credit is not damaged simply because you finance a car at a BHPH lot. Often it’s a credit black hole because no one outside of the dealership is aware of the loan. Moreover, the reason you are financing through a BHPH dealer is that your credit is already weak. The damage to your credit was already done before you walked onto the lot.

Also see: What’s a credit card loan? It’s likely cheaper and better than a cash advance—here’s how it works.

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