Buying a car can be a very frustrating experience; it can be even more frustrating if you’re trying to get a car loan with a bad credit problem. Bad credit is not prejudice or bias, it can happen to anyone at anytime .
Purposely not paying back loans is not the only way to acquire a bad credit history. Get divorced, lose a job or get injured for a long period of time can also throw you into a bad credit rating very quickly. If you want to be there or not.
Having bad credit doesn’t mean you’re a bad person or you deserve to drive an unreliable vehicle. There are many companies out there that understand the situation you’re in and want to help you find a vehicle you want and will also help you get it.
This section will show you how to find lenders that will provide car loans for people with bad credit and how you can increase your chances of being approved and what to expect after you’ve been approved for a car loan.
Bad credit topics in this section:
Errors on your credit report will cause you to have a bad credit score, if you’re unaware of what’s been reported to your credit report, read my section on how to get your credit report online. If you do find errors on your credit report, cleaning them up will increase your credit score.
If you have a bad credit history or rating, you have nothing to be ashamed of. There are millions of people in the world today with credit problems and with the way the economy is, the number is rising on a daily basis.
It may take a little time but you can always turn a bad credit rating into a healthy strong history. However if the one thing you lack is time, there are several lenders payday loans online out there willing to help you know matter how bad your credit rating is.
What is “Special Finance” or “Sub-Prime” lending?
In the finance world, sub-prime lending also known as “special finance,” “non-prime,” “near-prime” and “second-chance financing” means to give loans to individuals who may have difficulty in maintaining the repayment schedule of the requested loans.
Sub-prime loans are characterized by less favorable terms and higher interest rates in order to compensate for the borrowers higher credit risk. Although these types of bad credit auto loans may possibly be more expensive, they will allow someone with a bad credit rating and score to obtain a car loan and be on their way to re-establishing an excellent credit history.
Car Buying Tip – Never let a finance manager or car salesman talk you into something you know you can’t afford. They don’t care if you can make the payments or not as long as they can make a commission from the sale. If you know you cannot comfortably afford the monthly car loan payments, don’t buy the car!
Credit ratings a sub-prime borrower may have:
- Excessive debt to income: The individuals known income is not enough to pay current responsibilities, living expenses, interest, and repayments of the money borrowed.
- A proven history of missed or late payments over a period of time.
- Limited experience with debt, no track record to determine if the borrower will repay a loan. The lender automatically assumes the worse.
- Defaulted debt, failure to pay debts completely, charge-offs, not fulfilling the borrowers responsibility to pay back the debt.
- Bankruptcy, foreclosure, legal judgments (orders to pay), unpaid child support, etc.
What to Expect if You Have Bad Credit
Having bad credit does not necessarily mean you will not be approved for a car loan. You may have to take a step back when financing your next vehicle. The goal is to do it right and as quickly and as financially painless as possible.
You can fix your past bad credit history, it just takes time. Until then you may have to fulfill certain requirements you wouldn’t have to if you had good credit history.
Obstacles you may have to overcome:
- You may have to provide a larger down payment.
- May have to pay a much higher interest rate than posted in a car dealer’s advertising.
- May only qualify for shorter finance terms.
- You may only qualify to borrow only a certain amount of money.
- You may not qualify for the exact car you want to buy or the dealership your applying with will only have a small selection of cars for you to choose from depending on your approval qualification.
- You may have to supply extra documentation such as proof of income (computer generated pay check stub with your name), proof of residence (phone bill, credit card statement or utility bill with your name and current address), employment and personal references.