3 Factors To Getting A Car Loan With Bad Credit

In the last few years car loan financing has changed incredibly. The banks have tightened up lending, and people’s overall credit situations have worsened. Buying a new or used car is a big investment, so financing can be tricky! And there’s a few things you should know before going into a dealership and attempting to finance a new or used car — even if you have great credit!

What Car Loan Finance Companies Look For

When financing a vehicle, the rate, term, and therefore payments are going to be determined based on a few different factors. First, is credit bureau through either Equifax or Trans Union. Second, is the amount of investment YOU are making into the vehicle. And third, the vehicle itself.  The worse your overall credit situation, the more the banks will scrutinize each piece of this puzzle. Let’s take a look at each piece to see how you can give yourself the best opportunity for automobile financing, even with bad credit.

1. Your Credit History

In years past, banks would lend car loan money based almost exclusively on your beacon score. Today, that’s totally out the window. Car loans today are based on previous comparable credit performance. What this means is, a loan officer will take a look at your credit history (you can see what that looks like by searching google for “free annual credit report”) and search for previous accounts that would be similar in financed amount and payment to the car you are looking to finance.

I’ve seen many customers who have not paid well on almost everything except previous auto loans, which they paid good on. And because those car loans and or other comparable payments were paid well, they got financed even though they had previous charge-offs, bankruptcy, a large amount of collections, and more. Often times these people had very very low credit scores, but their comparable credit was good enough to get a car loan!

On the other hand, if you haven’t paid other similar credit well at all, or had prior charge-offs, repossessions, or slow payments, it does make securing financing on a car a bit tougher. However, there are two other factors that weigh almost as heavily as your credit history, so don’t fret! Even with slow pays, repos, etc I have been able to secure financing on a new car for people who could satisfy a bank’s wants in the other two areas. Take a look:

2. Your Investment

Another area that banks take very seriously, whether you have good or bad credit, is what type of investment you are willing to make into the vehicle. This can either be a cash investment, or something that can be easily liquidated such as a trade-in vehicle that has equity in it. In general, cash weighs more heavily since it means that you are willing to put some skin into the loan. Remember, a car loan for a bank is a liability. They want to make sure that it will be repaid, and someone who puts any money — especially a significant amount of money, $2,000 or more — makes the loan less risky for them. The less risky a car loan is for a bank, the more likely they are to be free with their money and loan it to you.

I have seen many instances where a customer’s credit history was frankly terrible, and they had no comparable credit that was any good. But they had a significant cash down payment and/or equity in a trade-in vehicle, and so it lessened the risk of the loan and they got approved for auto financing. The same person without the cash investment in the loan would not get approved, simply because the bank won’t feel that the person seeking the loan, if they have poor previous credit experience, is willing to make all the necessary efforts to repay the loan. Banks like to loan money, but even more important is that the money they loan gets repaid in a timely manner. Having a cash investment helps the banks to feel sure this will be the case.

Remember, your investment is just one area that plays a part in getting approved for a car loan with bad credit. It is good to have a large cash investment, but one is not always required.

3. The Vehicle You Are Looking To Purchase

The bank is going to loan money to you which will be secured by a vehicle. So what type of vehicle it is, it’s average value, condition, miles, and who you’re buying it from all play a large part in what type of financing you can receive. Let’s look at each of these points individually: 

  • Type of vehicle — matters because certain vehicles have lower risk factors than others. For example, loaning money on a fast sports car to a younger person carries a higher risk than loaning money on a minivan to a family of five. Because of this, if you have poor past experiences with car credit and not a large investment, but want a car that’s likely not very practical, a bank isn’t going to be as easy to lend money on that car as they will one which is more practical and suited for your needs. Also, newer cars are less likely to cause problems than older ones, so banks are more easy to lend money on a brand new vehicle and give a better finance rate, than on one that’s three or four years old.
  • Average Value — Different banks use different sources to gather information about a car’s value. The value determines how much can be financed on the vehicle and if any negative equity can be carried over to the next vehicle. Cars with a higher value or that hold their value better than others are easier to get financing on.
  • Condition — As mentioned earlier, the bank will be investing their own money into your vehicle, so if it’s not in good condition, it’s not likely something a bank will want to invest money into. This is why it’s typically better to buy from a dealer and banks give better rates to dealers, since there’s someone to stand behind the condition of the car.
  • Miles — The more miles a car has the more likely it is to have problems, and also therefore the less stable the value is on a car. For that reason, cars with lower miles — especially new cars with next to no miles — are easier to get financed on. If you have bad credit, the general rule of thumb is to stay away from cars with more than 60,000 miles. And on used cars, banks like to see it when customers opt for extended warranties to protect them from large future shop bills.
  • Who you’re buying it from — actually plays a larger part than you think. If you’re buying a car from a dealer, the bank knows that dealer is more likely and has better resources to stand behind the car than a private owner. Dealers also often offer extended warranties which help lower the overall risk. So it will be much easier to get financing through a dealer. Picking a larger new car dealership will also lend you a benefit, since they likely have good relationships with lots of banks that they can use to help you get financing.

The Bottom Line on Financing 

The bottom line is, there are many factors to getting financed on a new or used car in Spartanburg — or anywhere! Get to know where you stand in each of these areas and you will have a better idea of what type of financing you are likely to receive on your next car purchase.

Car Loan – An Easy Access To Finance For Owning Dream Car

Owning a car of your dream is a reality these days. This is thanks mainly to car loan that is made available to each and every aspirant wishing to have a car of his own. The lenders have kept terms-conditions of car loans attractive for winning as many customers as possible in a tough car loan market, making the loan even easier to access. As per your requirements and as suits to your pocket, car loan is there for asking to buy either a new car or a used one. But before making a deal, it would be wise to have a close look of what is happening in car loan markets and what are basic aspects that one must be aware of in taking car loan.

One of the attractive feature of every car loan is that you do not have to look for a collateral is secured car loan is your option. it may be more beneficial if you can place any of your valuable assets like home as collateral with the lender. But if you do not like to risk home for the fear of its repossession, then the very car you intend to buy can easily secure the loan. all you have to do is to hand over the deal papers of the car to the lender who will return them after you have paid back the loan completely. In the meantime you can continue driving your car. But in case of payment default, you would be losing car to the lender.

Secured car loan have this advantage of lower interest rates and if your home secures the loan, the rate of interest goes down. The loan amount depends on equity in collateral like home or the price of the car. While you drive the car, the burden of the loan is lesser as the car loan can be repaid in 5 to 30 years. Larger repayment duration means you can reduced monthly payment towards installments.

Tenants or non-homeowners however can opt for unsecured car loan. Unsecured car loan comes without the clause of collateral, making the loan a completely risk free affair for the car owner. As there are risks for the lender, unsecured car loan come at higher interest rate making it costlier for the borrower. Unsecured car loan is solely offered on the basis of financial standing of tenants or non-homeowner. Income and employment documents are required from the borrower for ensuring safe return of the loan. you will be approved smaller amount for a shorter repayment duration as unsecured car loan.

Do not worry about bad credit. In case of secured car loan, as lenders have the borrower’s property as security, bad credit does not matters much to the lenders. For unsecured car loan however income and employment documents are must for showing to the lender. But bad credit borrowers will be approved the car loan at higher interest rate. At the same time one should note that if car loan installments are regularly cleared, the borrower’s credit score goes higher and loan availing in future becomes easier.

Buy a car from a reliable car dealer and check it for mechanical defects and quality. Compare different car loan providers who have showcased car loan interest rates and terms-conditions on websites. Apply to the suitable lender online for a fast processing and approval of car loan. Make sure to pay off loan installments in time for escaping debts.

Used Car Loans – Better Than A Personal Loan?

If you have decided it is time to get a new set of wheels, or perhaps your first ever, you are undoubtedly looking into where to turn to obtain the best kind of loan. Most people begin the process by considering getting either personal loans or used car loans for their upcoming purchase. What is the difference, and how do you know which option is right for you? The answers to these questions will be explored here, giving you the information you need to make the best decision.

Before you even have a specific car selected you can apply for your car loan online. Make sure you know the requirements of your loan before you apply. This means that, if you do go ahead and shop around for cars before applying, you need to make sure it will fit within the parameters laid down by the lender. For instance, some car loan companies may require that the car be new enough or have a limited number of miles. There may be restrictions on what kind of vehicle it can be.

Used car loans can only go toward the purchase of your car. On the other hand, personal loans are much more flexible and can be used toward a number of different purchases. The only reason to take out a personal loan instead of a used car loan is if you have another sizable purchase you want to make at the same time without taking out a separate loan. If your only purpose for taking out the loan is to buy a used car, a loan is what you need. While a loan is a loan no matter where you get it from, there are some differences that you should consider if you are still not convinced that your car purchase is best obtained with a used car loan.

Before you even begin receiving used car loan quotes, you should run a credit check on yourself. If this is your first car, you may not have credit built up yet to be approved for a loan. A cosigner will counteract this problem. Ask a parent or other close family member if they would be willing to sign on a loan with you. Be sure you never sign anything, even in a digital format, you do not fully understand. Contact information should be available on websites, so contact the lender with your questions before you sign up.

The biggest difference between one loan and the next is the interest rate. Obviously, the lower the rate, the faster you can pay it off and the less interest you will pay overall. You often have the choice between variable and fixed rates on used car loans. A variable rate may cost you less money if you want to pay off your loan in the shortest amount of time possible. However, if you know it will take you a little longer to pay off your loan, a fixed rate will keep your payments predictable over the entire term length.

The next big difference is secured versus unsecured loans. When you have collateral, such as the car itself, you are participating in a secured loan. These often come with lower interest rates because there is some security. When you take out a personal loan, most often these are unsecured loans, meaning you are likely to pay a higher interest rate for the convenience of not providing collateral. No matter where you take out your used car loans, watch out for hidden fees to avoid any unpleasant surprises.