Bad Credit Blog

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

So your old car has finally bit the dust! You knew it was coming it was just a matter of when. The time has come to replace the old run down car with a new one.

Most of us have been there and done that so we can identify with your dilemma. However this situation is yours exclusively so you will have to answer certain questions to figure the next move. If it has been quite a while since you went car shopping you may suffer “sticker shock” when you shop. Let’s see if we can help you make this easier. After all life is hard enough without any extras thrown in!

If it has been awhile since you filled out a credit application here are some things the lender will be checking.

• Your credit score
• How much money you make
• Where you work and how long you’ve been employed there (two years of steady employment is what they are looking for)
• Your current credit cards and their balances according to the credit report
• How often you make on-time payments vs. 30, 60, 90 days late – and how recent were the late payments
• Whether you own your home or rent

The first two things are easy to prove. If you don’t know your credit score you will want to find out so you won’t be surprised or embarrassed. You should order a copy of your credit report to check for errors and fix those. There are three agencies (Equifax is the largest) that gather data from creditors. This information is then used to tally your credit score. They use a complex system and we explain that on our site . But the credit agencies make mistakes - sometimes lots of them - so you need to check your report for these errors.

We strongly advise getting pre-approved for your loan unless you like the headaches associated with shopping for a new car. Being pre-approved guarantees the amount of the loan and also guarantees the interest rate you will be charged. Then when you go shopping, tell the sales consultant how much you are approved for (and stick to it) because they will try to talk you into something that costs more money and of course a higher rate of interest if they arrange financing and higher monthly payments because they will make more money on the deal.

Check your local paper for pricing and the internet, but be sure to get pre-approved first so you will know how much you can afford.

Study our articles on car negotiating and verbal sales tricks that dealerships use to confuse you and get more money from you. (Car Negotiating Verbal Tricks) (Car Negotiating The Four Square)

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!