Bad Credit Blog

I ran into an old friend the other day. We hadn’t seen each other for several years and honestly, I wouldn’t have recognized her. The years hadn’t been too kind. As we sat in a restaurant over coffee she told me of the problems she had. Her husband of 35 years had found himself another honey. She had lost her job and moved to a new city. Frankly any problems I had suddenly seemed small by comparison.

When she found out that my daughter and I had a website dedicated to helping folks with bad credit get auto loans she became animated and asked a thousand questions. It seems that her husband had taken their newest car and left her with an old clunker that quite frankly if it had been a horse the kindest thing you could do would be to shoot it.

She has a new job that actually pays her more money than her old one did but she had only worked there about three months, hardly a career job yet. She desperately needed a newer car but she knew her credit score wasn’t the highest, so she was looking for a bad credit car loan, which most dealerships don’t like. In fact, she had shopped two dealers already but couldn’t get conventional financing. Could I help was what she really wanted to know.

The first thing I asked her to do was go to our website and order her credit report and to also order the credit score. She needed to find out why the lenders were turning her down. If there were some issues from her husband and hers mixed credit she might be able to get them removed using a credit attorney like Lexington Law. This would increase her overall score and get her out of the “bad credit car loan” range.

Then I explained to her about getting a pre-approved car loan. The car loan folks we recommend specialize in helping people like my friend. And they don’t just offer auto loans to people with bad credit, they offer competitive car loans to anyone! So once her score had improved she could still contact one of them and get pre-approved for an even better interest rate!

The way it works, I explained, was with the pre-approved loan you know exactly how much car you can get BEFORE shopping - not the other way around. I recommended that she read the articles that we have on our site, since my daughter and I have both sold cars we know the tricks they will try to pull. This way she would be armed with the best information for car negotiating and be pre-approved!

My friend followed my advice. She pulled her credit. Found a couple errors on it from her “married days.” Had Lexington Law take care of them in less than a month and viola! A few weeks later my old friend pulled up in front of my house to show me what she had been able to buy! She was grinning so big that you know what - she looked 20 years younger!

As a car salesperson I saw it time and again. People coming onto the lot with that “defeated” look. The one that says, “I know my credit sucks and that I can’t get a car loan, but I’m desperate.”

The sad thing was, about 50% of these people were right. The major banks wouldn’t loan them the money. Which begs the question, “If my local dealership couldn’t get me financed for a bad credit car loan, how can an internet company do it?”

Simple. They SPECIALIZE. What’s that mean . . . specialize? It means that they are set up to “take risks.” In other words. They already know you have bad credit, but these car lenders either have access to lenders that are willing to work with you, or better yet, they ARE the lender.

These bad credit auto lenders know you have a bankruptcy. They know you’re behind on a few credit cards. They understand that life gets ahead of you occasionally. And they are ready, willing and prepared to give you a car loan!

When you are pre-qualified it will be the easiest car shopping you have ever experienced. With pre-qualified shopping you know exactly how much you are approved for and all you have to do is find the right vehicle, sign some papers and drive out! Well maybe I have over-simplified it a bit - but not by much. You don’t have to wonder if you got the best interest rate or anything else. Just be sure to leave room for tax and license and of course gap insurance and that’s it.

Is it hard to qualify for a bad credit car loan from one of our lenders? Absolutely NOT! Go for it! Fill out the credit application from one of our lenders and see how pleasant and easy it is. You will never buy a car any other way!

For a complete list of our bad credit car loan lenders click here.

It sounds silly, I know. Pre-approved car loans for people whose credit is tanked. But there are several good reasons for pre-approval - especially if your credit isn’t that great.

As a car salesperson in Phoenix I dealt with a wide range of people with bad credit. The worst ones were the ones with the sense of “entitlement.” Strolling onto a lot as if they were millionaires and picking out a vehicle that was obviously outside their price range based on their credit history and/or their current income.

The second type came on the lot meek and mild and wanted to buy a car “under $5,000″ and finance it. They knew they had bad credit and thought they were “thinking like the bank.” In other words, lending them just enough to get a car, but not enough for a new or newer model.

Both of these types had the potential to be completely ripped off by the wrong dealership. Why? Because they really had no understanding of how credit and financing works in the car business.

So how does getting pre-approved for a car loan this benefit you if you have bad credit?

When you have bad credit often you can’t negotiate for the best price on a car. Or pick out the exact car you want for that matter. Why? Because what most people don’t know is that when you have bad credit lenders “charge” the dealership a fee for the risk they are taking on you.

What does this mean? The charge is usually a percentage of the car’s value - for instance 5%. So if you’re buying a $10,000 car and the fee is 5% then that’s $500 the dealership WON’T take off the price of the car! Not only that, the $500 is part of the amount you’re financing so you are actually paying the bank to assume the loan. I’ve seen charges as high as $2,000 because of a person’s credit!

The difference between pre-approved car loans and getting a loan at the dealership is that you avoid paying this fee!

When you are pre-approved the bank loans you a “fixed amount” of money and it’s your job to go out and find the vehicle you want and then negotiate the price down. This guarantees you the best price on the vehicle of your choice because you’re not paying the bank to assume the loan.

Getting a pre-approved car loan also means you can pick the vehicle YOU want. On the lot I worked at we often had 3 or 4 vehicles (usually the same models) that we knew would “fit” the banks parameters for people with bad credit. So when a person with bad credit came on the lot we would try to steer them to one of these cars. Not necessarily to make more money in OUR pockets, but because we knew that the buyer had the best chance of getting approved on one of those models because they would fit the banks guidelines and had enough markup to absorb the fees without losing money on the vehicle.

Getting a pre-approved car loan also keeps you from looking at vehicles that you won’t get financing for. If you are pre-approved for $15,000 then you won’t be out looking at vehicles that cost $22,000, wasting your time, and having your credit pulled multiple times by the car dealerships. Once you know how much you’re approved for you can find the best vehicle in that price range and negotiate with the dealership for it.

Bottom line - Being pre-approved for car loan a vehicle loan gives you more options and puts you in the drivers seat. You can negotiate for a good car deal and get the vehicle YOU want. So if you’re credit challenged and need a vehicle don’t go out looking for a car without applying for pre-approval first!

“I thought the website was a great help for me! I did have one question that I am hoping you can answer for me… I am just now 18 and I was trying to figure out some good ways to try to build up some credit to get a new car. Everything else I have found was not as helpful as this site, so I was hoping there was a way that you guys could give me a good honest answer to this question. Any help would be a great addition to what I have already learned here on your site. Thank you”

That’s a note from a young man who emailed us recently. I emailed him and answered his questions, but after thinking about it we decided it would make a good post for people who are looking to finance their first car.

Banks look at a few different things when deciding if you’re “trustworthy” enough finance a first time car through them. Credit score is definitely one of them. Other factors though are:

• Time on the credit bureau (how long have you actually had credit)
• Job history (At least 2 years of steady employement (even if you’re only 18)
• Income (must be $1200 a month gross, but $1500 to $1800 is better. That’s about $9.40 to $11.25 per hour, full time)
• Down payment (when you’re a first time buyer a down payment goes a long way towards showing the banks that you are a responsible person)
• How much do you want to borrow? (Even with $4,000 to $5,000 down it’s always best to try to buy a $10,000 or less car)

These things are true no matter how old you are. If you don’t have credit cards, and never finance anything, then you too can have a zero score, even if you’re 50+.

Now - the above list is just the “getting started” list for financing a car for the first time. Lenders look at a couple other things too:

• Can you prove where you live? (do you have legitimate mail coming to you. Preferably a utility bill - like your cell phone - with YOUR name and address. Not your parents)
• Can you afford the payments? You may earn $1800 a month, and live at home, and not pay rent or utilities. But over the next 5 years you MIGHT move out (at least I’m sure your parents are hoping you will). Then you’ll have rent, utilities, groceries, clothing, etc. etc. etc. So the bank is only going to want to you have a payment that equals MAX 25% of your paycheck. ($400).

Now - that’s the bank. But do you really want to shell out $400 of your hard earned money for the next FIVE YEARS? That’s a long, long time. Consider that when vehicle shopping and keep your payments as low as possible by not buying the “biggest, baddest” truck on the lot.

Another thing to consider is INSURANCE. If you’re a guy under the age of 25 your insurance is gonna be sky high on a newer vehicle. So price around for insurance FIRST before financing. Make sure that you can afford the payments AND the insurance - and that you won’t be eating canned tuna for the next 5 years to afford them!

Even if you earn enough money, have a down payment and a steady job the bank may still turn you down. Especially if you have NO credit history. So be prepared with a co-signer if at all possible.

A co-signer should be someone whose older (30+ years) and has established credit. The better the score the better the interest rate. If their credit is very, very bad then the bank probably won’t finance a car with them so try to find someone with a decent credit score (650 and above).

Once the loan is established remember this - Every on-time (or late) payment is recorded on BOTH your reports. So be kind! NEVER, EVER make a late payment. This person is going out on a limb for you and guaranteeing to pay the loan if something happens to you. So return the favor and keep their credit report clean.

The best way to get a car loan is still through pre-approval. Think about it this way. With cars and trucks going for $10,000 all the way to $25,000 isn’t it better to know how much you can afford before shopping? What happens if you find the “truck of your dreams” but it’s $20,000. That’s probably not a vehicle you can afford.

When you’re pre-approved you can shop with confidence. Find the ONE BEST vehicle that you like, negotiate the price, and go home with a smile on your face!

We hope this information is helpful. If you have questions like the one from this young man give us an email. Contactus@1-800badcredit.com

Good luck to you!

Car buying can be an extraordinarily stressful experience if you don’t know what you’re doing. It’s like playing a game where only one side knows the rules. And that side is the dealership. So to even the playing field here’s some simple car buying rules to help you truly get the best deal on your next car.

Once you’ve found the car you want, it’s time to sit down with your sales rep to negotiate the terms of your contract. After a little back and forth on price, figuring out your interest rate, and calculating your monthly payment, you’re ready to sign on the dotted line, right? Not so fast. You’ve only taken the first step in car buying.

When you read the fine print you may find that additional fees and charges have found their way into your contract – including add-ons you didn’t necessarily ask for.
Most people in the middle of the car buying experience are so focused on getting the best interest rate and negotiating the most affordable monthly payment that they’re unconcerned with the fine print of the contract. By the time they get to the step where they review and sign the paperwork, if the sales rep is throwing industry terms at them that they don’t fully understand, they become exhausted from the entire process and just want to get it over with.Here are a few insider tips to make sure you don’t regret signing those papers.

First Rule Of Car Buying - Read the Fine Print

While this seems pretty obvious and self-explanatory, it’s amazing how trusting the car buying consumer can be. Honestly, the last time you bought a car, did you read and fully understand the contract before you signed it? Probably not. Most people don’t. Some unscrupulous car dealerships are betting on that.

Because most people don’t read the fine print, some sales reps can slide in additional, undisclosed charges or extras with huge mark-ups to their profit.

Also, make sure there are no blank spaces on your finance contract that can be filled in later - wherever there are blank spaces, write in “$0″ or “N/A.”

Second Rule Of Car Buying - Typical Extras

Most of us are familiar with learning about the standard features of a vehicle and then figuring out which additional features we are willing to pay extra for. But here are some extras to look out for when reviewing your contract

• Fabric protector
• Car alarm (this includes LoJack)
• Paint sealant
• Credit life insurance
• Window etching
• Extended warranties
• GAP

The value of such extras depends on individual customer needs and situations. If the sales rep attempts to tell you that some or all of these extras are “standard” for every vehicle on the lot, ask to order your car from the factory, or suggest the dealership trade with another dealer that hasn’t pre-packaged their vehicles. Extra products can add thousands to the negotiated price of the vehicle.

The Problems With Extras Occur In Two Areas

First - Rather than suggest specific extras individually priced, the sales rep lumps all the products together and pushes you to buy them as a package.

Second - Unscrupulous sales reps can add thousands of dollars to the amount financed for these products, but not disclose the price increase until the last possible moment, when the financing contracts are being signed.

Ask for a Menu System Disclosure

The best disclosure method I’ve seen in years involved using a menu system. On a separate sheet of paper the rep produces a document that includes:

• The negotiated price of the vehicle or trade difference
• The additional price of suggested extras (these can be shown as various option packages that may save money when bought in combination and as individually priced options)
• New totals initialed by both parties. This procedure makes sure that any suggested extras are properly explained and disclosed. It also allows the customer time to consider each item separate from the longer and potentially confusing finance documents. The final numbers from the menu should get carried over directly to the finance document.

Your best bet when car buying - as always - is pre-approval for a vehicle loan. With pre-approval you will know how much you can afford for a new vehicle, and will be able to leave a little room for warranties and GAP, without getting duped by the dealership into purchasing unwanted items and paying for them with higher payments or longer terms.

If you want to purchase from any dealership you choose then we highly recommend getting pre-approved for a loan from RoadLoans or HSBC Auto.

If you want to work directly with a dealership that has a relationship with the lender then DriverLoans or Harbor Credit are great companies.

All of these lenders are major nationwide banks. They will treat you right, regardless of your credit situation.

Your wallet does not have to go through the ringer when purchasing a new vehicle. You can protect yourself from blindly signing an unfavorable car deal by doing your homework, going to a car dealership with a good reputation, being prepared, asking questions, and double checking behind your sales rep.

By Scott Conklin

No one wants or expects to get duped by a car dealership. Unfortunately, it happens more often than it should. If you’re in the market for a new vehicle, protect yourself by recognizing the most common car dealer tricks and traps.

Scams happen on the car lot everyday. These aren’t the clever and amusing schemes you’ll see in movies like Catch Me If You Can or Matchstick Men. Car lot scams are nothing more than simple, petty tactics used by unethical dealers to trick you into spending more than you have to. You can avoid this by being Pre-approved before going car shopping .

Dealers love to say that they’re looking out for your best interest; but they aren’t always sincere. Here are some things to watch for:

VIN etching. Your dealer might recommend having the car’s windshield etched to deter theft. Not a bad idea, but politely decline if he wants to charge you a premium for the service. You can buy a VIN etching kit online for $20 to $30.

Loan guaranty. Ignore any claim that your dealer makes about paying off your loan if you find yourself unable to meet that obligation. If you default and the dealer pays it off, you’ll end up owing money and fees to the dealer instead of to the bank. Either way, your credit rating will be shot.

Affordable payments. Some dealers will want to negotiate with you on the car loan payment , rather than on the price of the car. They might say that they’re trying to make it more affordable for you. But it’s more likely that they’re trying to confuse you into paying too much. What’s another $1,500 when you’ve already agreed to pay $25,000? Some dealers like to strong-arm you into paying more by adding in fees after you’ve already agreed on a price. Here’s how they do it:

Dealer prep. Every dealer will try to charge you dealer prep costs. Your job is to know ahead of time what the standard costs are for that car by checking an Internet site, like Edmunds.com. Try to negotiate these as low as possible. And never pay more than another dealer would charge, or more than what’s listed on the sticker.

Extended warranty. It’s your decision to purchase or not purchase an extended warranty. Period.

Bait and switch APR. You buy the car and take it home. A week later, you’re notified that, due to a problem with your loan approval, your interest rate and monthly payment are being increased. The bait-and-switch APR scam is one of the most frustrating tricks a dealer can pull. Avoid this by arranging for financing before you walk into the dealership.

In this storyline, it isn’t the con artist who’s the clever one-it’s you. Keep an eye out for the warning signs and head for the door if you suspect someone’s trying to rip you off.

Ref: MortgageLoan.com

BY: Catherine Brock