This article covers many different aspects of bad credit car loans and buying cars with bad credit in detail. Topics include the difficulty of obtaining bad credit auto financing, whether or not you actually have to have a down payment, interest rates and whether or not you really have to pay a crazy high interest rate, buying used vs new, where you can get approved and finance add-on products. This article will certainly help you along your way if you are looking to buy a new or used car and have a poor credit rating.
What is a Bad Credit Car Loan in General?
Sub-prime and Secondary finance companies offer auto financing for people that have poor credit ratings. This is commonly known as a “Bad Credit Car Loan”, as it is a car loan for someone that has bad credit. The interest rates for these types of loans can be very high or reasonable, depending on the lender that you choose to apply with. If you have a bad, fair, slow or poor credit rating (which is all the same), then this type of financing is what you will have to use to buy a car on finance. Not all lenders are created equal and some can offer better terms than others.
Is This Type of Financing Difficult to Obtain?
It depends on what type of lender that you use. Traditional banks are much more difficult to obtain a loan with if you have bad credit. Usually, regular banks and mainstream lenders require large down payments and are very restrictive as to the amount that you can get approved for.
Specialized sub-prime lenders can provide easier approvals and some companies provide their services online, which makes obtaining this type of financing much easier. Generally, if you have a credit score below 680, then a sub-prime lender is what you should deal with if you want to get approved. Credit scores as low as 480 can get approved through special finance programs and in many cases, with little to no money down. While most people become discouraged when trying to get approved with a bad credit rating, it’s much easier if you simply use the right kind of lender.
Do I Have to Have a Down Payment?
Car dealerships request down payments, whether you have good or bad credit. It’s simply another way of getting more money from you in addition to the amount that they receive from the finance company that approves your loan. Buy here, pay here dealerships always require down payments to lower the risk that they incur by offering you financing.
Obtaining a car loan with bad credit, with no down payment is a matter of using the right lender with the right combination of vehicle, finance amount and terms. Just because you have bad credit, does not indicate that you are required to have money down for a car loan. In fact, the need for a down payment can easily be eliminated with the right combination of vehicle and lender.
Do I Have to Pay a High Interest Rate?
Different lenders have very different lending requirements and guidelines that they use to approve auto loans as well as, the specific interest rate that is charged. Contrary to popular belief, your credit score is not the only variable used to determine your interest rate. The year, make and model of the vehicle that you are wanting to purchase can make a significant difference in the rate that you are charged. So do you have to pay a high interest rate? It depends on where you apply and with which company that you get approved with. You will pay a higher rate than someone that has excellent or good credit, but it doesn’t have to be all that bad.
One thing that many people aren’t aware of is that car lots can actually increase your interest rate above and beyond what the loan company actually approved you at. This happens all the time and is the main source of profit for the dealership’s finance department. It’s called back-end profit.
For example, if you get approved at a rate of say, 12%… the dealer can add to that rate from 3% to 5%, depending on the number of “add-on points” allowed by the finance company. So if you’re real interest rate is 12%, it’s common that you will be told that you’ve been approved at 15 to 17 percent. The difference that you pay in additional finance charges is profit for the dealership and paid to them by the finance company. The dealership finance manager is paid a portion of the amount, usually 25% of the additional finance charges that you pay as a result of this increase in your interest rate.
The way around paying the higher interest rates is by using a direct lender. By bypassing the dealership finance department you can get lower interest rates and also have the ability to negotiate as if paying cash.
Do I Have to Buy a Used Car?
New cars that are priced reasonably can be obtained with bad credit just as easily as used cars. The added benefit is that there frequently are manufacturers rebates that can be applied to lower the price of the car below invoice, which puts you in good standing as far as the amount requested vs the loan value of the vehicle (great way to get a no money down new car loan with bad credit).
So no, you don’t have to buy a used car just because you have bad credit. In fact, many people think that car payments are always lower on used cars. That’s not the case and the reason is simple. New cars can be financed for longer than used cars. Also, it’s easier to get a lower interest rate (much lower) on a new vehicle than on a used one.
Where Can I Get Approved Easiest?
As described above in the first section, you will need to use a sub-prime or secondary finance company to get a bad credit car loan. You should use a good lender that is legitimate and has a long track history of getting people approved, regardless of their credit history. Some are available online and can provide quick approvals in minutes. But beware of scams and hoax sites that don’t deliver.
While you can try to get approved by going directly to a car dealership, it is best if you work with a lender directly. Dealing with a direct auto loan lender will certainly get your loan approved easier and with less hassles. Just because you have credit problems, does not mean that you can’t get an auto loan direct, just like people that have good credit. You just have to use the right kind of lender as mentioned above (sub-prime or secondary).
Do I Have to Buy an Extended Warranty to Get Approved?
This question is being addressed because some car dealerships will try to pressure you into purchasing an extended car warranty. Some will state that it looks favorable to the lender or is a requirement that the lender has stipulated for the approval. This is not the case and you absolutely do not have to purchase any type of extended warranty as a requirement for an auto loan.
What About GAP Insurance Added to My Loan?
GAP insurance covers the difference between what you owe on the vehicle and what it is actually worth. In cases where the amount that you will owe will be more than the market value for the car, GAP insurance can be good to have to protect you from having to come up with that amount should the vehicle be stolen or totalled in a car accident. It is against the law for a dealer to force you to purchase it, so be careful when signing the dotted line and don’t let a dealer pressure you into having it added to your loan contract.
About Bad Credit Auto Finance
18-12-2009 by admin
Have you recently made an attempt to get an auto loan and were denied? If this is the case then it is likely that you were denied your request for a loan due to bad credit. Of course with all of the fancy terminology that loan officers often use they may have said something like, they only grant loans to prime borrowers and unfortunately your credit score places you in the sub prime range. Many people are not familiar with what that exactly means but are certain that it isn’t good.
Basically, sub prime means that you have bad credit. While you are not going to get a loan from this particular lender it doesn’t necessarily mean that no one will give you a loan. Every lending institution has its own factors that constitute “bad credit” but you are teetering on the very edge if your credit score is even 600.
Perhaps the good news is that there are lenders who stay in business by extending loans to people that fall into the sub prime category. The deal is that they will loan you money to buy that new automobile but in return you are going to pay a higher amount than someone with good credit would pay.
That doesn’t, however, mean that you have to get raked over the coals. There are some things that you can do to ensure that you get the best price that is possible for someone with bad credit. First of all, get a copy of your credit report! ALWAYS stay on top of your credit information by using all 3 credit bureaus. Request a tri merge credit report. Know what your credit report says and make sure that what it shows is correct. Dispute all inaccuracies!
If the credit bureau cannot verify the inaccuracy within 30 days, they have to delete it from your credit report per the Fair Credit Reporting ACT. You can also shop around for the best lender because they are not all going to offer you the same deal. Maybe even consider securing a loan prior to visiting a dealership. The other alternative that you have is to see if your credit score can be brought up with a bit of work. This may mean postponing your auto purchase for a few months but it really would be worth it for the savings that will be involved.
New Jersey Bad Credit Car Loans
24-11-2009 by admin
Do you live in the beautiful state of New Jersey? Whether you live in Northern, Camden, Ocean City, Atlantic City, Allentown, Bethlehem, Easton, Vineland, Millville, Bridgeton, Trenton, Ewing or any other area in New Jersey you know about the current climate of declining property values, higher interest rates, and changes in available mortgage products, and more and more homeowners are becoming delinquent or going into foreclosure. Many folks are losing their hat, their home and their good credit, through no fault of their own.
If you are in the market for a new or used car but need to get solid information about bad credit auto loan in New Jersey here are some tips that can help you.
Let Lenders Compete for Your Business Online
If you decide to look online for a loan, you will find that there are sites where you can apply for a loan and have lenders compete for your business. You only have to fill out one application and hundreds of lenders will evaluate your loan and give you an idea of the rates and terms you qualify for. To help you land favorable terms, shop around online and get pre-approved for a loan first. Then, see if the model you want comes with any incentives, such as 0% financing. It is difficult for a bank to beat that.
Look for a website which works with a nationwide network of finance companies and dealers to offer a free service focused on helping consumers with special financing needs. The advantage to turning to a New Jersey car loan site
Bad Credit Auto Loan Financing
06-11-2009 by adminDo you need to get a car, but are afraid of being turned down because of bad credit? Do you think that you must be that 2% when you hear that a company will approve 98% of the people that apply for an auto loan? Bad credit auto loan financing is out there and you do have a few options to consider.
First, you can always use a buy here pay here lot and there are actually some very reputable ones out there. There are some buy here pay here companies that do not believe in charging you the state maximum in interest and forcing you to make payments you probably cannot afford. Sure you are going to pay a bit more for your car, but it is a way to get a car and get one fast.
Another option is to save about $3,000 for a down payment. There are many dealers that will work with you regardless of your credit if you have $3,000 to put down. This represents a commitment that they will accept because they know you have a good chunk of money invested in your car right from the beginning.
The last option is to use a company that does bad credit loan. Usually if you are willing to put your car up as collateral they are much more willing to loan you the money you need. They will require that you have something good on your credit that is at least 6 months old, but that is about it.
You can get bad credit auto loan financing, but you have to be willing to accept that your rate is going to be higher and you might not get the exact car that you want. Make sure to have the car checked by a mechanic first and always try to get a warranty and full coverage insurance to protect yourself.
Consumers With Bad Credit Can Still Get Car Credit
11-08-2009 by admin
Nowadays finding car credit is not considered difficult since every magazine, newspaper or commercial you see on television is offering auto credit deals. The problem is that many companies offering automobile credit do not extend it to people who have bad credit. This makes it nearly impossible for people who need to get this type of credit but don’t have good credit. However, as with everything there is a solution as there are other lenders that offer credit to people who have bad credit. The things you need to watch out for are un-trustworthy dealers who are out there trying to take advantage of your situation.
One of the first things you should understand is that because you have bad credit you are not going to find lenders that extend auto credit to you for a low interest rate. You can try to negotiate but you just will not get the same interest rate that a person with good credit gets. If you come across an advertisement that offers automobile credit to people with bad credit then almost always it’s just a scam and something you need to avoid no matter how appealing the advertisement might be. There are also many websites that promise low interest rates for people with bad credit but those too are also scams.
When searching for a lender online its important for you to first go though the lender’s website. You can also visit various forums in which people talk about their experiences with various lenders of car credit. This should help you compile a shortlist of lenders you want to work with. Once you have narrowed down the lenders you can then apply for a quote by making sure that you state your finances as accurately as possible. You also need to remember that every lender offing bad credit auto credit will not offer you car credit and there are a few which might actually turn you down.
When applying for car loan credit, it’s also important that you choose a car which is cheap and affordable. It also makes sense for you to put a down payment which not only decreases the loan amount but also works towards increasing your chances of getting approved for car credit. If you have an old car, you can consider selling it to pay for the down payment of your new car.