Auto Loans With Bad Credit

Protect Credit Early

Start early when it comes to protecting your credit. Many college students do not realize failing to pay utility bills or campus medical bills while attending school can drop a credit score. Even failing to return a video to the rental store can result in a dip. Start thinking about credit early, and work to avoid any negative reports while attending school. Even if you have high student loans or other debt problems, simply avoiding any missed payments can protect you from having negative information on your report.

Budgeting for a New-Car Auto Loan

Think about what you can afford when you purchase your car. You may have a salary for the first time, and to can be enticing to go buy a pricey car. However, you need to think about the other payment obligations you will have in the near future. To determine your budget, start by cutting your monthly salary in half. From this amount, subtract any debt payments you have, including your rent. Determine how much you will save each month, such as 5 percent or 10 percent of your paycheck, and subtract this amount. The resulting figure is the price you can pay monthly for your auto loan.

Selecting the Right Loan Terms

Once you know how much you can afford, you should think about the length of your loan. It is best to pay off a post-graduate college auto loan within 5 years. This will help you if you intend on buying a home in the future by reducing the possibility these two loans will overlap. Given the monthly payment you can afford and the length of your loan, you will know your ideal loan limit. This is the budget you need to use when you select a car. 

Looking for Incentives

Many lenders will offer you a discount as a recent graduate. However, the lender does not have an incentive to give you this discount unless you explicitly ask for it. Instead of approaching the lender as if you are a wealthy young person, it may be better to approach the lender as a recent graduate in search of a good deal. Ask the lender, especially if you are using a dealership loan, how they intend to help you get into the car you are looking to purchase. 

Avoiding a Cosigner

It is common for lenders extending financing to recent graduates to seek a cosigner on the loan. Lenders know college graduates are often connected with older individuals who have higher credit scores and incomes. A lender would much rather get one of these established borrowers on the hook for the debt than a young person who is less likely to be concerned with making payments. Do not agree to a cosigner unless you would otherwise be turned down for the debts.

This article is from loan.com

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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

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