Guide to Auto Financing with Bad Credit

by

Shirley Anderson

Have you been able to keep your credit in good standing in today’s economic climate? Not surprisingly, many are having a hard time financially as a result of layoffs and job losses, and the expenses don’t go away just because the pay cheque has. A lot of people have been hard hit and their credit is suffering, but lower credit rating or not, you still need a vehicle, if for no other reason than to find a new job. If you’re having trouble figuring out how to afford one, this Guide to Auto Financing with Bad Credit should help.

Getting a bad credit car loan is much easier than it used to be. However, it does requires a different approach than if you were dealing with the bank. You are working with a different set of rules and rates, as well as lenders.

Guide to Auto Financing with Bad Credit - the Good Stuff

The ideal situation involves dealing directly with an auto financer, whose operational practises are similar to that of a bank’s. The biggest difference between this type of lender and a bank is the higher interest rate and regular payment amounts. You will likely also need a bigger down payment with a direct financer. This is all part and parcel of a low credit loan though. Different rules, remember?

The good news is that the loan term is usually shorter than with more conventional car loans. For example, you may have two years to repay the loan rather than the typical five years, which means you are free of that debt sooner.

The really great thing about getting auto financing with bad credit, is that if you conscientiously make all your payments on time, you can increase your credit score and perhaps be able to deal directly with the bank for your next vehicle or other type of loan.

Perhaps the best news of all is that you get a vehicle!

Guide to Auto Financing with Bad Credit – the Stuff You Should Know

There are no guarantees in life, except death and taxes. Someone said that a long time ago and it appears to be true. There are circumstances when someone is just not eligible for a bad credit car loan. Certain conditions must exist in order to receive your pre-approval.

--> You need to have a monthly income of at least $1,600

--> You must have a credit score of at least 550

--> You are required to have a working phone

--> You should have proof of a permanent address

--> You will have to provide proof that you have a full-time job

--> You will also need to prove that you are eligible for car insurance

If you do not have all of these requirements, then work on getting any you’re missing before applying for credit of any kind. It is better to wait until you can meet the criteria than to apply and get turned down. Applications for credit are noted in your credit record.

People who have all of the above stand a very good chance of getting a bad credit loan.

Guide to Auto Financing with Bad Credit - Cautions

As with all occupations in life, there can be some bad apples. That is no different with bad credit car lenders and dealers. There have been occasional reports of shady dealings and illegal methods used on unsuspecting customers.

Always do your homework before submitting applications for credit. Find out about the loan company that you’re applying to. Have they been in business long? Are they members of the Better Business Bureau? Do you know someone who may have used their services that you can talk to?

Whatever you do, make sure that you know what the going interest rates are for people in your situation. Then get ALL the costs associated with your loan put into writing before you sign anything. Read the contract carefully.

Auto credit scams happen and when they do, monthly payments end up so staggeringly high, that consumers can seldom afford to cover them. Please use caution and be an informed consumer. In fact, it is a good idea to do online searches for the company that you’re thinking of dealing with.

You may decide to approach and get quotes from several lenders. That’s a great idea but remember not to authorize anyone to do a credit check on you. Once you’ve narrowed it down to the one or two that you think might be the one to go with, then you can go ahead and let them run the check.

Author's Note

There is so much information on this topic that it cannot fit into one article. There will be more to follow. Meantime, I hope that this Guide to Auto Financing with Bad Credit helps you in your time of vehicular need.

High Risk Auto Financing Basics

Auto Financing with Bad Credit: 3 Scams and How to Avoid Them