What to expect when buying a car with bad credit, part 1

The last sound you want to hear when you're rebuilding your credit is the clank of a dying car.

Not only would a new car stretch an overburdened budget even tighter, but blemished credit means you won't qualify for the best financing deals. The news isn't all grim, however. Though lending isn't as loose as it used to be for car buyers with bad credit, there are still options out there.

Geoff Williams, a freelance writer based in Loveland, Ohio, found this out firsthand after he declared bankruptcy. "My car literally died on the freeway, and black smoke was coming out of it," says Williams. Though he and his wife had another car, "it wasn't a very good one," he says, so they shopped around for a used car. Although auto loan interest rates currently average between 6 percent and 7 percent, "my interest is high -- around 20 percent," says Williams, who details his road to financial recovery in the book "Living Well with Bad Credit." "But I pay around $430 a month for a really good Subaru. In my case, it worked out fine."

Of course, everyone with bad credit won't qualify for a traditional loan. According to Bandon, Ore.-based firm CNW Research, only one in 10 car loan applicants with credit scores of 620 and below were approved through a bank, credit union or auto manufacturer's finance company in April. For applicants with credit scores between 620 and 749, eight out of 10 loans were approved.

But even if you find yourself denied, you're not destined to take the bus. A friend of Williams, unable to qualify for a loan due to credit problems, rents a car every month, Williams says. The car rental agency offers a discount for those who rent frequently, "so his price is comparable to what I'm paying," Williams says. "And in his case, he never has to worry about maintenance issues."