Auto Loans With Bad Credit

When you purchase a new vehicle one option that you have is whether or not to add an extended warranty to your loan. Extended warranties or “extended service contracts” are optional insurance products that protect you from mechanical breakdown expenses in the future after your factory warranty runs out. Here are some things to consider before you make a decision.
 
1) How Many Miles Per Year You Drive- If you are a low mileage driver you may not need to purchase extra coverage because you will not exceed the factory warranty mileage cut off. If however you are a high mileage driver it may be worth it to purchase a vehicle service contract because you know going in that you will exceed the factory warranty mileage. Higher mileage drivers tend to fair better with vehicle service contracts.

2) How Long Do You Keep Your Vehicles- Some people trade every 3 years, if this is the case with you then it really doesn’t make a lot of sense for you to purchase extra coverage that you will never use. If the factory warranty goes for 3 years and you trade every 3 years there really is no reason to purchase it. For people who keep their vehicles for a long time the odds of a mechanical failure are more likely and it may make sense to purchase the coverage for a longer term.
 
It is important to note that the above are general examples and assume the vehicle is brand new with zero miles at the time of purchase. Keep in mind that all factory warranties and extended service contracts expire at the mileage or time specified which ever comes first. These things need to be considered when making a decision.
 
3) Who Is Backing The Warranty- There are many insurance companies out there who offer extended warranties. If you decide to go with one from them make sure it is backed by a financially stable company. A warranty is only as good as the company that provides it. If they go out of business you will be left with no coverage. All major manufactures of vehicles offer their own factory backed extended service contract. It is recommended that if there is an option, always purchase the factory backed warranty even if it is more expensive. When you purchase a factory backed extended warranty the company has a vested interest in your satisfaction as a customer. These warranties will usually mirror the original new car warranty that came with the vehicle and cover more than insurance company backed warranties. You will also be able to bring it to any dealer representing the brand of vehicle you purchased for repairs.

4) How Much Does It Raise My Payment- The prices of extended warranties will vary depending on how much coverage you elect to purchase. When you add this amount to your auto loan it is going to raise your payment. You should weigh your options of whether or not you can afford the increase in payment and whether the peace of mind is worth the difference.

Extended warranties are optional and not a requirement to be approved for a loan. They are however a way for you to guarantee that you will not get hit with any huge repair bills in the future.
 

Technorati Tags: auto loan, auto loans with bad credit, extended warranty, loan

Although it may feel like it, filing bankruptcy is not the end of the world. There are many things that can cause a person to have to file bankruptcy. Layoffs, employer downsizing, divorce, and adjustable rate mortgages just to name a few. Your credit score is going to take a hit when your bankruptcy discharges but your overall financial situation should start to improve. Your traditional sources of lending you have used in the past will not be able to help you until you start to re establish some credit. Luckily there is a whole industry of sub prime lenders dedicated to auto loans with bad credit. These lenders deal with damaged credit and previous bankruptcy filings. Although the rates will be higher than prime rate lenders, it is a way for you to start rebuilding your credit history with the goal of raising your credit score back up to a point where you can refinance this loan at a much cheaper interest rate in the future. There are some things however that you will need to demonstrate to these lenders ahead of time to be considered for approval.
 
1)      Bankruptcy Must Be Discharged- Your bankruptcy must be discharged before sub prime lenders will approve you for a loan. The reason for this is because at any time before the discharge, a person can add outstanding debt into the bankruptcy. Banks do not want to approve a loan only to have it added into your bankruptcy filing. Be prepared to provide copies of your discharge papers to the lender you are applying through because they are definitely going to ask for them.

2) Provide EvidenceYour Financial Situation Has Improved- This is a fairly simple task given the fact that the majority of your debt has been discharged in the bankruptcy filing. Be prepared to provide a list of debtors that you no longer are required to pay back. This is especially important if you bankruptcy is recent because the credit borough can sometimes take a while to update this info. If a lender looks at your credit report and it still shows your entire debt load you may not qualify because of “debt to income” ratio shortages. Having a list of your discharged debtors will eliminate this problem.

3) Provide Proof Of Employment- You are going to have to be employed or have a verifiable source of income to be considered for approval. Sub prime lenders know that your income level may have dropped from your previous employment if you have been laid off. The good news here is that your debt load has also dropped. The important thing is that you are back to work. Most sub prime lenders will not accept unemployment compensation as proof of income.
4)      Down Payment- Although not always required it really helps to show the lender that you have saved up some money to put down on this loan. Not only does it demonstrate that your financial situation has improved but also that you have had the financial discipline to set aside this money.
 
As you can see it is possible to get approved for auto loans after bankruptcy but there are some things you will need to provide to be considered. The interest rate you pay is going to be higher than you are used to paying but as you start to make timely payments on this loan your credit score will start to rise and you can look to refinance this loan at a cheaper rate in the future. It is recommended that you have copies of all the items listed above ready ahead of time to submit with your application. This will speed up the process and greatly improve your chances for approval

Technorati Tags: auto loans, auto loans after bankruptcy, auto loans with bad credit, bad credit car loans

It use to be that when you needed a loan you would just go to your local bank or credit union. The thought of driving across town or to a different city to apply for a loan never crossed most people’s mind. Now days with the way the economy is many people are finding themselves behind on some of their bills and as a result having a low credit score.

Once your credit score gets below a certain point the traditional sources of financing you have used in the past will not be able to help you. There is however a whole industry of sub prime lenders dedicated to approving auto loans with bad credit. The chances of one of these lenders being in your home town are pretty rare but luckily you can turn to the internet to find them. The internet has really leveled the playing field for the average consumer. No longer are you limited to the banks that are in your area or that you are willing to drive to. Anyone can apply for auto loans with bad credit from the comfort of their own home. With the geographical constraints eliminated by the internet sub prime lenders have become very competitive in trying to earn your business. Here is a list of some benefits of applying online for auto loans with bad credit.

1) Time- No longer do you have to drive into the bank and fill out the credit application and then wait for a week while the approval committee meets. Online lenders usually have loan officers working 24 hours a day to review your application. Some even have computer models that will decision a loan without a human even looking at it. When you fill out the application online you will usually get a response of some kind within a couple hours and sometimes in minutes. These lenders are set up for online applications and have very streamline processes in place to respond to you quickly.

2) Ability To Apply To Lenders In Other States- Most sub prime lenders are nationwide and licensed to lend money in all 50 states. Once approved they will usually over night the paperwork to you for signing. When you send the paperwork back they will mail you the check for the loan proceeds.

3) Easy To Find Online- Simply use your favorite search engine to locate lenders that deal with damaged credit. Look for phrases like “bad credit ok”, these types of phrases are indicators that the lender works with people with low credit scores.

4) Apply To Multiple Lenders- As mentioned earlier the internet has made this segment of the market very competitive. Once you get an approval from a lender take the time to apply to others. Many times they will compete for your business. Be careful here because excessive inquires on your credit report can lower your credit score. It is not recommended to apply to more than 2 or 3 lenders at a time.

As you can see there are many benefits to applying online for auto loans with bad credit. By simply doing a quick search you will have multiple lenders to choose from. Take the time to fill out the application carefully and once approved apply to other lenders to be sure you are getting the best rate and terms.

Technorati Tags: auto loans, auto loans with bad credit, bad credit car loans, online auto loans

Dealer ads in the newspaper can sometimes be difficult to decipher. There are many phrases, abbreviations, and disclaimers that can make them difficult to understand unless you know what these mean. Here is a list of explanations of common terms you will see in these ads.
 
1) O.A.C- This stands for “on approved credit”. When a dealer has an ad that offers some type of monthly payment or special interest rate you will see this disclaimer. Auto dealers do not lend money but they do arrange financing through direct lending agreements they have with various banks. When they advertise a special finance rate or monthly payment it will usually be at the cheapest rate they can find. To qualify for these offers you will have to meet certain credit criteria. Not everyone will meet these guidelines so this disclaimer is to let consumers know that if you qualify through their lenders for this offer you can take advantage of it. Otherwise it may be slightly higher.
 
2) Well Qualified Buyers- Similar to O.A.C this disclaimer means that you have to meet certain credit criteria to qualify for the advertised offer. With this disclaimer though the qualifications are going to be very strict. There may be income requirements as well as credit requirements.
 
3) Zero Down Plus TT and L- When a dealer advertises a lease or loan payment it may say zero down plus TT and L. This stands for plus taxes, title, and license fees. So in all reality you are putting zero down towards the price of the car itself but you have to pay for your taxes, title work, and license fees upfront to get that advertised payment. If you don’t want to pay those fees upfront then the payment will be higher if they are rolled into the loan.
 
4) Rebate To Dealer- This disclaimer means that whatever price or payment is being advertised on the vehicle the dealer has already taken whatever rebates are available off of the price to get to the advertised offer. 
 
 5) A.P.R- This stands for “annual percentage rate”. Pretty self explanatory but anytime you see an interest rate advertised it will have APR next to it.
 
6) Security Deposit- When you lease a vehicle the leasing company will require you to pay a refundable security deposit upfront that is due at the lease signing. The amount of the security deposit can vary but it is usually equal to your monthly lease payment rounded up to the nearest $25.00. This deposit will be returned to you at the end of the lease provided the vehicle is returned in good condition and there are no mileage overage charges. In some instances leasing companies will run special offers where they will waive the security deposit.
 
These ads are not intended to be deceiving but there are so many variables that go into calculating payments and leases and special financing offers that dealers could not possibly put all of this information in the add itself. By adding these disclaimers and abbreviations they can still get their message or offer across. If you have questions you can call the dealer and they will be happy to go through the add with you to make sure you understand before making a purchase decision.
 

Technorati Tags: auto ads, auto loans, auto loans with bad credit, bad credit car loans

Auto dealers are in the business of selling cars not lending money. They do however have direct lending agreements with lenders to facilitate the sales of their automobiles. When you go to purchase a vehicle from a dealer they will have financing available if you elect to finance through them. Even though you are signing paperwork at the dealership they are not the entity lending you the money. Here is a rough overview of how it works.

1)      You agree to purchase the vehicle- After you have made a deal on the car you want to purchase the dealer will ask you how you want to pay for it. Do you want to pay with cash or a check? Do you want to go get a loan from your own bank or credit union and bring back a cashiers check? Or would you like to finance through the dealership?

2)      You agree to finance through the dealership- Once you determine that you want to take advantage of the dealer financing you will be asked to fill out a credit application. The dealer will in turn submit your application to one or more of the banks that they have direct lending agreements with.

3)      You accept the loan terms offered by the dealership- Once the dealer has you approved they will present the terms of the auto loan to you. If you agree to the rate and terms then they will proceed to print the necessary paperwork.

4)      You sign loan documents- The dealer is authorized to execute all the paperwork needed to obtain financing from the selected lender. You will be signing all the title work and bank contracts right at the dealership you do not have to go directly to the bank to sign.

5)      Dealer Assigns Loan To Selected Lender- After you sign all the documents and leave with your new vehicle the dealer will assign that loan to the lender. They will over night all the paperwork you just signed to the bank and the bank in turn will mail the dealer a check for the amount of the loan.  Now your loan is in place with the bank. They will send you a payment book in the mail shortly and you will make payments directly to the bank not the dealer.

Dealers have direct lending agreements with multiple lenders. They can shop around for the best rate for you. Make sure however you know what your personal bank or credit union has to offer ahead of time to ensure you are getting a fair deal. Some people shy away from dealer financing because they think their rates are higher but that is usually not the case, dealers have very competitive rates to offer. Financing through the dealer is also convenient; you can literally be in and out of the finance office in 15 minutes with your new vehicle. This saves you the time of running over to your own bank and waiting for an approval, picking up a cashiers check, and driving back to the dealer to take delivery. As long as you know you are getting a fair deal dealer financing can be a good option.

Technorati Tags: auto loans, auto loans with bad credit, dealer auto loans, dealer financin

When you apply for auto loans with bad credit the lender will require that you furnish them documented proof of income before they will disperse any funds. This can be challenging for some people particularly if you are self employed or work on commission. Below is few ways to prove your income that most sub prime lenders will accept.

1) Computer Generated Pay Stub- This is obviously the easiest and most preferred way to prove your income. Provide a copy of your most recent pay stub to the lender when you submit the application. If you don’t have your most recent then provide the closest that you have but no further back than 30 days. Most sub prime lenders will not accept pay stubs over 30 days old. Make sure the copy that you provide has your year to date total on it.

2) Provide 3 Months Of Bank Statements- Some sub prime lenders will accept your most recent 3 months of bank statements. This is helpful if you are self employed, work on commission, or get paid as jobs are completed. The lender will total your deposits from your bank statements and average them out to determine a monthly income amount. Be careful here because some lenders will not count any month that has an over draft or negative balance.

3) Employment Letter- Some lenders will accept a letter from your employer stating how much your income is. This is particularly helpful if you just started a new job and have not received a pay check yet. This letter should be on company letterhead and list you name, your hire date, and your wages. Make sure it is signed and dated by an officer of the company you work for.

It is important to find out what type of proof your lender will accept to verify your income ahead of time. Have copies made and ready to submit with your application.

Technorati Tags: auto loans, auto loans with bad credit, carloans for bad credit, proof of income

When you credit score gets below a certain point you may have to turn to sub prime lenders for your auto financing needs. As you apply for these types of  loans you will notice that their interest rates are considerably higher than your traditional lending sources you have used in the past. Although it may feel like it, sub prime lenders do not charge higher rates just because they think you are a bad person, or to punish you for your current financial situation. There are some very real and calculated reasons that the rates are higher on these types of loans.

1)      Higher Risk Of Loss- Sub prime lenders have much larger default rates as a percentage than regular prime banks do. When a lender has high default rates they have to charge a higher rate of interest on all their loans to help off set the losses they incur on the defaults. Banks are in the business of making money and charging higher rates allows them to collect more money in interest up front and hopefully remain profitable after the losses they incur. If they were to charge low rates on all their loans and still incurred the same amount of losses they would go out of business because the losses would exceed the income that their loans generate.

2)      Higher Collection Costs- When a lender has higher default rates they also incur higher collections expenses. Repossession, legal, title, and staff expenses all increase when you have large amounts of loans that default. All these expenses affect the lenders bottom line.

3)      Verifications- Sub prime lenders have very strict guidelines that they have to follow. Before any sub prime lender will disperse funds on a loan they will verify all the information you provide on your application. Staff is needed to contact employers, landlords, mortgage companies, and insurance companies. This can be a long and tedious process that takes time and hourly employees.

As you can see there are some very real expenses that sub prime lenders incur as cost of doing business. The best plan is to make timely payments on this loan and as your credit score starts to rise look to refinance through a prime lender at a lower rate in the future.

Technorati Tags: auto loans, auto loans with bad credit, bad credit car loans, sub prime

Most if not all lenders will require you to have full coverage insurance on the vehicle you want to purchase in order to be approved for financing. When you sign your loan paperwork one of the forms that your loan officer will have you sign is called an “Agreement To Provide Insurance”, this form states that as part of your loan agreement you agree to keep the vehicle fully insured with liability, comprehensive, and collision coverage while you have a loan on it. It also states that if you let your insurance lapse that the lender will obtain insurance to cover the vehicle and add the premium amounts to your loan balance. This is called “force placed insurance” and it is very expensive. Why does the lender do this?
 
 It’s important to remember that auto loans are secured loans with the vehicle being the collateral. When you apply for a loan with a lender part of the decision process they make is how much they will be willing to lend on any particular vehicle in relation to the “actual cash value” of the vehicle. It is in the lenders best interest to keep the loan amount as close to that value as possible to minimize their risk. In the event of a default and repossession they can sell the vehicle at auction and hopefully get enough to cover the outstanding loan amount or more. If there were no insurance on the vehicle and it were to get totaled then the lender has no collateral at all. You are stuck owing on a loan for a vehicle that doesn’t exist anymore and the lender has no collateral to repossess if you were to stop making payments on that loan. When you have full coverage insurance in place the vehicle is either repaired or replaced making everyone whole again.
 
As you can see, aside from being a requirement it is in both parties best interest to keep the vehicle fully insured while there is an outstanding loan in place. If you switch insurance companies it is recommended that you contact your lender right away and give them your new insurance information to prevent any confusion.  
 
 

Technorati Tags: auto loan insurance requirments, auto loans, auto loans with bad credit

More and more people are finding themselves with lower credit scores these days. If you are looking to purchase a vehicle this can cause problems if you need a loan. When your credit score is high you can have you choice of competitive lenders willing to approve you. Once you personal credit score gets below a certain point though your traditional lending sources you have gone to in the past will not be able to help you. Most prime banks and credit unions have strict guidelines and charters that prevent them from approving you once your credit score gets below a certain point.
 
 Luckily there is a whole industry of lenders dedicated to approving auto loans with bad credit that you can turn to online. These lenders specialize in approving loans for people with damaged or bad credit. These lenders realize that your low credit score and current financial situation are most likely temporary and will improve over time. These lenders will charge higher rates than your traditional prime banks so it makes it worth the risk for them to approve you. As you make timely payments on this loan your credit score should start to improve and allow you to refinance this loan through a regular prime lender. You will be sacrificing now with a higher rate with the goal of rebuilding your credit so you can pay less in the future. When your credit is bad you have to start reestablishing some good credit in order to raise your credit score.
 
How to find sub prime lenders- The easiest way to find lenders that deal in auto loans with bad credit is online. Use your favorite search engine. Look for phrases like “bad credit ok” or “bad credit car loans” these are indicators that they deal in less than perfect credit. Avoid applying to lenders that have phrases like “we offer the lowest rates” or “well qualified borrowers” these are indicators that they are only looking for people with really good credit. Applying to these lenders is only going to get you a quick decline.
 
Apply to more than one lender- Sub prime loans are very profitable to the lender and they want your business. If you meet their guidelines and they approve you, take the time to apply to other lenders. This can help to make sure you are getting the best terms possible given your financial situation and allows the lenders compete for your business. When you have banks competing for your business you win.
 

Technorati Tags: auto loans, auto loans with bad credit, bad credit car loans

When you go to close on your auto loan one of the optional products your loan officer may offer to you is credit insurance. There are basically two credit insurance products that are offered today. Below is a rough description of what they are and what they cover.
 
1) Credit Life- This product is basically life insurance that covers whatever the outstanding loan balance is in the event of your untimely death. Premiums for this type of insurance vary depending on the size of the loan. The borrower is allowed to name a beneficiary at the time of signing the paperwork. If for some reason during the loan duration you were to pass away that loan would be paid off in full and the beneficiary would receive a free and clear title to the vehicle. Because there are very few restrictions to qualify for this insurance the premiums can be very expensive and are usually added on to your loan amount. If you elect to purchase this coverage your payment will increase and be more than if you elected not to purchase it.

2) Credit Disability Insurance- This product is basically disability insurance that covers the amount of your auto loan payment if you were to become sick or injured and unable to work. Again premiums on this type of insurance vary depending on the size of the loan and the elimination period before it starts. Most of these policies have a 7 day or 14 day elimination period. In the event that you become sick or injured and can’t work the payments will be made to the lender on your behalf until you go back to work or the loan is paid off whichever comes first. You do not have to be hospitalized but under a doctors care and there may be paperwork that your doctor will have to fill out to become eligible. These premiums can be expensive and are usually added to your loan amount which will increase you monthly payments.

It is important to note that these insurance products are completely optional and not a requirement to get approved for a loan. Borrowers should evaluate their own financial situation to determine if either of these insurance products are a benefit to them before they purchase.

Technorati Tags: auto loans, auto loans with bad credit, bad credit car loans, credit insurance