Bad Credit Blog

So you need a new car but think you can’t get one.

Why not?

A friend of mine said that to me the other day and that’s exactly what I asked him – Why not?!

He and his wife had been late on a couple of credit card payments and he thought that this would make banks “laugh him out the door.” Not wanting to be humiliated he was not even willing to try.

If you are in the same boat, “let not your heart be troubled.” We have some great news; you can qualify for the car of your dreams and not break the bank to do it.

Here’s some simple steps to help you get the best deal on your next new vehicle.

Order a copy of your credit report. That’s not earth shaking news but that is the first step. You have to know where you are in order to know how to get how to get where you want to be. Order one here for free: Click Here.

All right, you have your credit report – what do you do with it? You carefully read it and check it for errors. Nearly 80% of credit reports contain errors; which means yours has a very good chance of having mistakes. Look for the most common mistakes - creditors paid off that still show as open, accounts that are not yours, loan balances or amounts owed that are not correct.

Highlight the errors. I love highlight pens; they are wonderful. Highlight anything that is wrong. You have the right to challenge anything that you feel may be inaccurate, untimely, misleading, biased, incomplete or unverifiable (questionable items). If a credit bureau can’t verify the accuracy of a disputed listing, then it must be removed from your credit report.

There are two approaches you can take next. If you are in NO HURRY you can write and challenge every questionable item and wait because this will take some time. The reporting agencies receive thousands of letters and from the time they write to the lender you are challenging there will be at least a 30 to 45-day period. You may or not get the item corrected. OR YOU CAN TAKE THE 2nd OPTION.

You can hire a professional law firm to dispute and have them removed for you. A law firm carries more clout than you or I do as individuals. PLUS they guarantee results. We have thoroughly investigated this field and know that there are many companies willing to take your money - but in the end you get absolutely nothing in return. That’s not the kind of credit repair we are talking about. We are talking about guaranteed results from a major, reputable law firm – period! That’s why we recommend (and ONLY recommend) Lexington Law .

Now that your credit is clear of errors, it’s time to get financing for your new vehicle.

There are several ways to get financing for a new or late model car. But let’s just look two for the sake of time.

Walking into a dealership and applying for financing after you’ve selected a car. This is the #1 way to guarantee that you’ll pay more interest than you have to! As ex-car salespeople we know all the tricks a dealership will try to pull. From lying to you about your credit score (because they get a percentage of the interest rate, so the higher the better for them), to telling you that you’re “approved” when in fact, you aren’t! (After you leave the dealership they’ll send your information to all the major banks and hope one approves you. Then they call you back to ‘resign” the contract and often your payments are $50 or more higher than you originally agreed to!)

The way to guarantee that you are getting the best deal is to be pre-approved for your loan first. With pre-approval you know exactly how much you are approved for, take the check to the dealer of your choice, make your selection and drive out. With this system, and it’s so simple you will wonder why you didn’t think of it yourself!

Major Tip: Don’t let the dealer tell you they can get you financed for more car! Remember they have a vested interest in the deal and they are NOT looking out for you. Once you’re pre-approved shop within your budget. Try it – apply for pre-approval now!

We have already written on how to avoid getting caught in an upside down car loan and ripped off at the car dealership – see “You Can Get A Bad Credit Auto Loan, But What Then? Know Your Stuff Before You start shopping !” This article and others like it are on our website and blog and we hope you will read them before you purchase your next vehicle.Since both my daughter and I have sold cars and have seen the problem from the inside we know, you can’t say too much” about this problem.

Of course one of the very best ways to get the best rate on either a new or used auto is to be pre-approved BEFORE you go car shopping. This is important because it puts you in the drivers seat as far as interest, amount of the loan etc. All the factors that can cause you to have an “upside down car loan.”

“Upside down” is the term car dealerships use when you owe more money on your car than it is currently worth. Everyone knows that a new car depreciates when you drive it off the lot - and we accept that - but you should not pay one penny more than you have to in either value or financing!

With any kind of new loan, whether home or auto, the borrower is paying more on interest than on principal for the first two or three years. That’s just a fact you can’t avoid. If you start out owing $20,000 on a car loan and are making $500 payments, the interest each month for the first year or so is $300 or more, so less money is applied to the actual amount borrowed during this period. Hence, having an “upside down car loan.”

While everyone is upside down the first year or so, we’ve both seen people 3 and 4 years into a loan and still severely upside down. Why? Because they were so enthralled with the “something new and shiny” syndrome that the salesman was able to convince them to buy that new car before they really sat down and thought about it.

There are several ways you can keep this from happening to you.

Before you go shopping know how much you can afford per month and the type of vehicle you want. Do your comparative shopping on the internet ahead of time so you are educated on pricing.

Contact a lender and get pre-approved for the loan. We have lenders on our site that will pre-approve you then give you a blank check and a letter to take to the dealer.

To avoid becoming “upside down” on any loan it is best if you can put at least 20% down. This will probably mean that you purchase an automobile lower down the food chain than you really want. A $25,000 car would require $5,000 down to accomplish this but a $12,000 car would only require $2,400 down. If 20% is not possible get as close as you can.

Down payments also “pre-purchase” the warranty and gap insurance so that they aren’t part of the payments. This way you are ONLY paying on the car, and not on those extras that don’t really ad value to your car, but are important to have.

Finance the loan for the shortest time you can afford. I can personally remember when 60 month loans were becoming popular. Now of course they are longer which keeps you in debt longer. If you are not pre-approved a lender will often try to “trick” you into stretching your payments out longer to make them smaller, when what you really want is for the lender to lower the price of the car to make your payments smaller!

Give serious thought to GAP insurance. GAP insurance covers the difference between what you owe and the car’s blue book value in case of an accident that totals the car. So if your car is worth $10,000 and you owe $12,000 you are on the hook for the remaining $2,000 when the insurance pays you off and that could be huge!

Consider purchasing a used car instead. Since most of the depreciation has already occurred your car will hold its value longer. You can qualify for a pre-approved used car loan just as easily - as long as the mileage is 50,000 or less. A car that sold new for $17,000 will sell 1 to 2 years old for $13,000 used which is much closer to it’s true, current value.

Sell your old car yourself instead of trading it in. If you can afford to wait for the money you can usually get more on the street than you will at a dealership.

The biggest way to keep from being upside down on a car loan is pre-approval . That makes all the difference!

By Dewey Kearney

You’ve just learned that your request for an auto loan with XYZ Bank has been denied. The loan officer explains that the decision has to do with your credit score . XYZ lends only to prime borrowers; your credit score, she continues, places you squarely in subprime territory.

Subprime. You’re not sure exactly what it means, but it sounds like a condemnation that will forever brand you as being somehow deficient to lenders.

However, being deemed subprime doesn’t necessarily mean that your borrowing days are over. It may still be possible for you to get that sought-after car loan. That’s why you should be pre-approved before you go car shopping. Being pre-approved means that you can confidently walk into the dealership knowing that you are in control of the financing not the dealer. You will know what price range you are approved for ahead of time. Of course you will want to leave room for tax, licensing and gap insurance. The dealer will try their best to move you into a higher priced car and handle the financing for you – beware! That’s in their best interest, not yours.

But first you need to understand the term that defines you. A subprime borrower is one with bad credit. Each lender has its own definition of what constitutes a subprime borrower, but typically, a credit score of less than 620 lands you in this less-than-desirable category. For more information on credit scores, and what sort of factors cause them to suffer, please see our article on how credit works . There are plenty of credit lenders specializing in subprime lending who are eager and willing to loan money to those with bad credit. Naturally, though, there’s a catch. The interest rates for subprime borrowers are higher than if you have pristine credit – but it is not un-affordable.

So, now that you understand what your playing field looks like, how can you finesse the game in a way that gets you a reasonably priced car loan? Here are a few tips:

Check Your Credit Report

Make sure that everything on your report is accurate; it could be that information has been entered in error, and that your credit history is a lot less blemished than you’ve been led to believe. If you do find information on your report that is inaccurate, you need to address it right away. Contact the credit bureaus in writing, listing your name and address and clearly detailing the nature of the error. Access Your Credit Score For a long time, credit scores were available only to prospective lenders, who used them to evaluate those seeking loans. That has changed; it’s now possible for consumers to access this all-important number. Your score is available online from each of the three credit bureaus: Trans Union, Experian and Equifax. If you’ve got bad credit, it’s helpful to know it beforehand. Knowing your credit score will help give you a sense of exactly where you stand in your search for an auto loan.

Don’t Rely On The Dealer

Dealers take a cut of all car-financing deals they land; as a result, any loan that they’re able to get you with a bank or financing company is likely to wind up being more costly to you. Get pre-approved (not the same as pre-qualified) for your loan first. Ideally, you’ll want to secure your auto loan before setting foot inside the dealership.

Remember That Your Credit Score Is Malleable And Ever Changing.

When it comes to your credit history, the ball is entirely in your court. You can improve your bad credit by paying your bills on time, and not overextending yourself when it comes to loans and credit cards. If you have items that are out-dated or incorrect on your credit report these can be removed legally . With proper attention paid to the state of your credit, you could conceivably hoist yourself out of subprime territory in as few as two or three years. Going forward, check your credit score at least once annually. You may have to pay more than you’d like for the auto loan you’re about to receive, but in a couple of years, if your credit score has improved, you’ll probably be able to refinance your loan at a much lower rate.

By Warren Clarke, Automotive Content Editorwww.edmonds.com

From ABC Loan Guide, for About.com By Karen Schweitzer

When your credit is less than perfect, finding a car loan with reasonable rates and terms can seem like a bit of a challenge. However, getting a bad credit car loan may be easier than you think — especially if you shop online.

Why Shop Online

If you get a bad credit car loan straight from the dealer, you could end up limiting your car buying options. Dealer financing will also leave you saddled with high interest rates. By getting a bad credit car loan online , you have a better chance of getting a fair rate. This is because the online market is so competitive. There are tons of companies who are all vying for your business. They are willing to offer you low rates, reasonable terms, and minimal lending fees. And, best yet, they won’t think twice about your bad credit.

Finding a Bad Credit Car Loan Online

The biggest advantage to shopping online for a bad credit car loan is the convenience and you can be pre-approved before you go shopping. The advantage of pre-approval is this places you in the drivers seat as a cash customer. You can get a free rate quote from one or more lenders in a matter of minutes. Applications are simple to fill out and most online lenders are quick to answer any questions you may have.