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High risk car loans can result from situations like job loss, divorce, and high unemployment rates and can all place a person on shaky ground when it comes to creditworthiness. Having bad credit does come with its drawbacks as far as getting credit and taking out car loans. Fortunately, there are lenders out there who specialize in high risk auto loans. On the flip side, some of these lenders may engage shady business practices. Understanding how these lenders operate and what they look for in a borrower can go a long way towards securing an auto loan without placing your financial future at risk.
Lending money, in and of itself, entails taking the risk of not being paid back whether dealing with a low risk or high risk borrower. Considering the overall pitfalls involved with lending money, auto loan lenders must protect their interests through whatever resources they have available. Protecting their interests means doing the necessary credit check as well as tracking any negative or positive habits that appear in a person’s credit history.
Another way high risk car loan companies protect their interests is by using the car itself as a form of collateral. In the event a borrower stops paying on the car, the lender reserves the right to repossess it. Ensuring borrowers earn enough income to afford a particular car is another way lenders protect their interests. Fortunately, most people who find themselves in need of a sub-prime auto loan, will repay on the loan, which is why high risk lenders take the chances they do.
What distinguishes traditional lenders from high risk lenders has to do with the type of criteria borrowers must meet in order to be approved for a sub-prime loan. Traditional lenders and some of the more lenient lenders rely heavily on a person’s credit score. Credit scores provide lenders with a birds-eye-view of a person’s overall financial trustworthiness. Most traditional lenders will refuse to lend to someone with a score below 540 since borrowers with this low a score have most likely built up a history of charge-offs, late payments and repossession. At this point, borrowers fall within the “no credit” category, which is another term for high risk.
With high risk loan lenders, no credit financing is common, though strict conditions apply for loan approval. Lenders may request a minimum down payment amount of up to 20 percent. Most high risk lenders will charge a high interest rate due to the high risk nature of the loan. There are some lenders that operate as “buy here/pay here” establishments and handle their own financing. Considering these lenders pretty much answer to no one as far as financing institutions and car manufacturers go, borrowers may be at considerable risk of buying poor quality cars.
When approached in the right way, high credit auto loans can serve two purposes: getting you behind the wheel of a car and improving your overall credit status. Doing a thorough budget analysis in terms of your monthly income and cash flow, affordable car price ranges and ongoing car maintenance costs can help avoid winding up in the exact situation you’re trying to get out of now. Online car affordability calculators can be a great help when figuring how much you can afford towards a car loan.
Choosing a Lender
When shopping for auto loans, high risk loan borrowers in particular have to be especially careful. Some lenders specializing in sub-prime auto loans attempt to take advantage of prospective borrowers by offering low-interest rates or low monthly payments. Ultimately, borrowers end up paying way too much for way too long on a car loan. This is where online quote comparisons and online auto loan calculators can come in handy.
When shopping online, any lender you’re considering should have their contact details posted clearly on their website. Also, it’s always a good idea to call them before visiting the lot to ensure it’s a legitimate business.
For financing purposes, credit unions are another way to go since they cater to their customers and oftentimes can offer the most competitive rates. Most credit unions will offer their members better rates and are more likely to look past your credit history than a traditional lender.
Credible High Risk Lenders
Finding a credible high risk lender is a matter of doing a little research and asking the right questions. Credible lenders have the best interests of their customers at heart. Helping people in bad credit situations get back on their feet lies at the core of their business. By taking this approach reputable high risk lenders get repeat business through word-of-mouth. Reputable lenders will be listed with the Better Business Bureau along with other consumer advocacy organizations. Many will also offer limited warranties on their vehicles when it’s in their power to do so.
A good resource for finding reputable high risk lenders is ValleyAutoLoan.com. ValleyAutoLoan.com offers a network of affiliated lenders and dealerships from which to choose. Borrowers can pull up needed information on each lender using a quick and easy search tool. This process makes the task of finding refinance lenders and loans easy with all the needed information at your fingertips.
Tips for Getting The Best Deal
If you have a bad credit score, you may have an uphill battle when you want to buy a new car. While this should not scare you off, you should, at minimum, realize you will have to work hard to get a great rate. This is not the end of the world, and you can prepare for the process with ease. You can get the best deals from high risk auto lenders and here are eight great tips that will help you with this process.
Know where you stand: First and foremost, before rushing out to get a loan, you should know your credit score and how it stacks up against the competition. When doing so, you will have the tools needed to come in to the auto lender company and get the best rate for your situation. On the other hand, if you score is truly horrendous, you may want to reconsider the auto loan. If you do this, you can clean up your report, pay off bills and get a good standing with your current credits. Then, you can opt to look for a good deal on a vehicle loan. Remember, if you want to get a good rate, you should give the lender reason to trust you and want to work with you.
- Fill out the paperwork completely: It is easy to forget about the paperwork when applying for a loan. However, the lending institution will offer their quote based on this information. To get the most out of the experience, you should fill out your paperwork as well as possible. At the same time, you should not omit information as the lender will find out eventually. Of course, if you have a side income or some cash stashed in the bank, you should mention this in your application. Without a doubt, when giving a true and full picture, you can get a great deal on a loan and avoid a long and drawn-out process.
Give a Down Payment
Now, with a bad credit type loan, some loan officers will experience trepidation and are unlikely to give out at loan to a person in a horrible financial situation. To avoid this problem, you should try to give a decent down payment on your purchase. To do this, you should try to save $500 a month for a few months. Then, when talking to the loan officer, you can mention that you will put a couple of thousand dollars on the car. Without a doubt, when doing this wisely, you can get a great deal on your loan. Not only that, with a size-able down payment, you are unlikely to end up with financial problems in the future. However, if this is not an option at this time ValleyAutoLoan.com. can offer no down payment loans if this is a better fit for your need.
When you have a poor credit score and want to get a car, you may have to offer some flexibility on your purchase. Sometimes, you may need to offer a higher down payment. In other cases, you may have to take on a longer loan to meet the terms. Either way, when doing this, you will please the seller who is likely to work with you on landing you a car. At the same time, when getting a car, you should not cede everything. Instead, you should understand it is wise to find a good deal and avoid giving a massive down payment or getting a long auto loan. Instead, when reaching a consensus, you can get a great deal on your loan and walk out with the car of your dreams.
Temper Your Expectations
While tempting, if you have bad credit, you will have a hard time getting a luxury car or high-end sports car. While this is true, with a low credit score, it is still possible to get a low rate on a great car. For example, by looking at mid-sized Japanese cars, you can get a great deal and enjoy something that will not kill your month-to-month financial cash flow. Remember, now, more than ever, you can buy an inexpensive car offering safety and reliability. Either way, you must understand a person without top-tier credit is likely to pay a hefty sum to get a car loan.
Get A Co-signer
If you have horrendous credit and a sub 550 credit score, you may want to consider other options. Of course, one great way to land a car loan is to ask a friend or family member to co-sign. When doing so, you can get great rates, especially if they also have a high score. To do this, you should talk to your friend and mention your situation. By doing this, you can avoid a lot of problems as many with extremely poor credit miss out on car ownership. While doing this, you must talk to your friend and let them know you will have no issue in repaying the loan. Otherwise, if you are not honest or make a mistake, you may end up causing unneeded rift in your relationship. Simply put, this should be a last resort. With that being said, it is a great option if you simply want to do whatever it takes to get a car.
Now, if you have a bad financial situation that was a temporary problem, you may have an easier time convincing someone to loan you money. To do this, when talking to a loan officer about your situation, you should mention you had an issue in the past that was resolved. For example, if you had medical bills or a long-term unemployment situation that is now resolved, you will have an easier chance discussing the situation and receiving a decent deal on the loan.
Clean Up Your Credit
Lastly, if you have no other options, you may want to consider cleaning up your credit score. Sadly, if you have an extremely low one, you will have a hard time getting a loan. At the same time, if you have charge-offs and other negatives, you will have a nearly impossible time getting a loan you can afford. To fix your credit, you should call your creditors and work on a payment plan. Other times, if you have the cash, you can offer a lump sum payment to pay off your debt. Of course, if your situation is harder to fix, you may want to contact a professional who can help you clean your credit. On the other hand, in some cases, there might be mistakes on your report and you can call the bureaus and resolve the problem by removing incorrect items on the report. Without a doubt, with better credit in the future, you can, at minimum, refinance and get a better deal.
If you want to borrow money for a vehicle but have a low credit score, you should explore your options. One great way to get the needed funds is to head to a high risk auto lender. With this option, you will save money and avoid overpaying on your car loan. Without doing this, you are likely to overpay and end up with a serious issue on your hands when you do not have money to make your monthly payments.
High Risk Auto Refinancing
Saving money by applying for a refinance may seem like a strange concept to many. After all, the original loan is probably keeping you from saving money at the moment. If you are already having trouble saving funds with original loan, why start from scratch with an entirely new loan? You would think common sense would kick in at some point so you can make a different decision…right?
Actually, when you apply for high risk auto refinancing, the exact opposite happens. You are actually giving yourself a break by re-negotiating the terms of your current auto loan. If you choose to work with a lender who provides high risk auto refinancing loans, you can reduce your interest percentage and monthly payment amount significantly. In essence, you can call these lenders miracle workers because they have a knack for getting funds to individuals who are incapable of receiving loans.
- When you think about it, high risk car loan lenders offering car loans to drivers with terrible credit problems is a very smart move even when considering the risks of refinancing. Because of the challenging economy, huge groups of individuals are struggling to keep up with basic expenses. Many of these individuals maxed out several credit cards just to maintain their lifestyle. If these people could not pay off their credit cards in a timely manner, they either went into consumer debt or they filed bankruptcy to clear the debt.
Both scenarios can put a negative mark on an individual’s credit history for several years. Bankruptcies actually last for seven to ten years on average. Once these marks reach your credit reports, they are difficult to remove–even if you settle the debt on a later date. It is a terrible situation to live through, and no one does it on purpose.
It would be ideal if these marks went away after you paid these debts in full.
Unfortunately, they do not leave, which means the debt can still affect you negatively even after you clear it. No lender will want to work with you unless they truly understand what you are going through. The only lenders who may be sympathetic towards these situations are high risk auto re-financiers.
These alternative funding providers are serving a group of people who were left out of the traditional lending process. In addition to reaping rewards from obtaining mass amounts of business, they also get to help unfortunate individuals who need immediate assistance. Through second-chance financing opportunities, these lenders can provide assistance in one of two ways. They can find funds for individuals who do not qualify for bank loans, and they can refinance an existing loan that has a high interest rate.
It is nearly impossible to receive a bad credit auto loan for an interest rate that drops below 20%. The average bad credit lender will take advantage of their borrowers because they know the person may have no other options. Luckily, this misconception is false because companies such as Valley Auto Loans are giving quality options to desperate borrowers. They can help a person save thousands over time just by reducing this 20% rate by a few percentage points.
Receiving a high risk car refinance loan is not as easy as walking into the bank and sitting down with a representative. You will need to provide some personal information in order to shift your current loan to your new financier. You will definitely need to present all the information from your current lender, such as your contract, your monthly payment information, vehicle mileage, and any other information that may be pertinent to the loan. In certain cases, you may need to pull your own credit report from one of the three giants…or credit reporting agencies known as Experian, Equifax, and TransUnion.
In essence, your new high risk auto refinancing provider will go to your original lender and negotiate a term of release on your behalf. This is not a general shift of ownership like you may find in the mortgage lending world. Your new refinance lender is taking control of your loan for the purpose of giving you an advantage.
Some of you may be wondering how this high risk car refinance actually beneficial to you in the short-term. Can this deal put immediate funds in your pocket so you can actually start the money-saving process. The answer is yes, but it depends on how much equity you have in your current vehicle. Any bad credit refinance with cash back can put money in your pocket, but you stand to receive a higher amount if you had your car for at least eight months or longer.
The amounts you can save in the long-term through high risk auto refinancing will vary with lending institutions, interest rates, and loan durations. This does not negate the fact that your interest rate will drop significantly. We can use approximate values offered by Valleyautoloan.com to get a better understanding of how the savings will transpire. These rates could change at any time, but they will always be less than the bad credit standard of 20%
For high risk auto refinance loan amounts between $5000 and up:
- 36 month leases will have interest rates of approximately 3.65%
- 37 – 48 month leases will have interest rates of approximately 3.65%
- 49 – 60 month leases will have interest rates of approximately 3.25%
- 61 – 72 month leases will have interest rates of approximately 3.50%
- 73 – 84 month leases will have interest rates of approximately 3.65%
What does this mean in dollar value? It means significant savings. For example, an individual with a $10,000 loan will have an interest rate of 20% with a normal lender, which adds up to $2000 per year. With Valleyautoloan.com, this same dollar amount will have a rate of 3.65%. This adds up to $365 per year versus a couple of thousand. The difference is $1270 per year, which is a very hefty sum. Over a 60 month period, this $1270 will turn into $6350 in savings.
As you can see, this is an easy decision to make because the benefit is so obvious. At the very least, it would be in your best interest to sit down with a refinance company that deals with high risk borrowers. Prepare yourself to bring in personal and important information such as proof of income, remaining balance of current loan, and the title if possible. Once you qualify for refinancing, you can prepare yourself for the significant amount of savings you will receive.
Co-signing & Co-signers
Being a co-signer can be risky, especially when dealing with sub-prime credit and high risk car loans. It can also be the only option in some situations, so is it a good idea? Before anyone agrees to become a co-signer on someone elses high risk car loans, they really need to know as much as possible about the situation. They also need to know about everything and everything that could affect them personally when it comes to signing on high risk car loans for someone else.
We at Valley Auto Loans understand high risk car loans, and we make it our mission to make sure that everyone is fully informed and prepared to take on such responsibilities. In some cases, a loan applicant will be denied for high risk car loans due to their poor credit. In this case, a person with good credit must step in to offer their credit as an alternative or the applicant must work on credit re-establishment. Those with good credit can usually qualify and be entered into to the finance contract in either of two ways: as a co-buyer, or a co-signer for a person with bad credit.
Co-Buyer and Co-Signer Similarities
1. Both types are responsible for the loan and are considered co-buyers, with the primary borrower. If the primary borrower fails to meet the loan requirements, co-buyers and co-signers then must make the loan payments.
2. Both types must place their signature on the loan contract.
3. Along with the primary borrower, both types can be subjected to a collection if the loan goes into default.
4. The lenders for high risk car loans will review and analyze the credit of both the borrower and co-borrower.
Co-Buyer and Co-Signer Differences
1. Lenders name a co-borrower as either a co-signer or a co-buyer based upon their income in comparison to the primary borrower.
2. A co-buyers income amount can be added to the primary buyer’s if their income is not high enough to qualify them for a certain loan.
3. A co-signer’s income cannot be added to the primary buyer’s however. Instead both parties’ incomes must qualify separately.
It is far easier to be approved as a co-signer if you are closely related to the primary borrower. For example, spouses are almost always approved to the ease of income-mingling when it comes to high risk auto lenders.
For those considering becoming a co-borrower, consider these facts:
Co-borrowers bear full responsibility for the loan in the event that the primary borrower fails to follow the loan’s requirements.Co-borrower’s credit can be lowered if the loan has a negative end result, (Failure to make payments or other contract breach). Becoming a co-borrower can be the only available option if someone you know needs a loan, and if you have a good credit score and the ability to make the payments if the primary borrower cannot, then it is an easy issue. However if you also fail to meet the requirements of the contract, it can greatly damage your credit. We at Valley Auto Loans want you to know that even those with bad credit can be approved for high risk car loans instantly. If co-borrowing or needing a co-borrower is a risky deal for you, we can help. Apply for a loan from Valley Auto Loans today and see just how easy it is to gain a loan, even with bad credit.
Consumers with a high credit score and good credit history generally qualify for car loans without facing any serious difficulties. However, the entire structure of the auto lending system is designed in a way that can very easily dishearten and demoralize consumers with poor credit. All said and done, this should not be considered to be the end of the world because people with credit problems can take several corrective measures to increase their chances for approval in the future.
We are extremely confident about this because working with bad credit auto loan shoppers has been our forte for several years. Our efficient auto loan approval system has helped thousands of credit challenged consumers qualify for their auto loans with excellent interest rates. This blog has been designed specifically to help people find answers to their financial concerns.
Finding Dealers to Work With
Every locality in the United States has plenty of auto dealers. However, for poor credit borrowers, it is difficult to find dealers who have partnerships with the most efficient poor credit lenders. Most of the sources of bad credit auto loans around us are those who only have tote the note car loans to offer. The biggest disadvantage of dealing with them is that they do not report any of their loans to the credit bureaus. As a result, their customers will never see an improvement in their car credit, even if they maintain an excellent payment record. Therefore, this problem relating to high risk auto lenders will still remain in their life when they decide to buy their next car.
One more reason to avoid these dealers is that these dealers have no affiliation with the franchisees of any dealership offering new cars. Most of the cars available in these dealerships are older, unreliable, and have a high mileage. Many legitimate new car dealers and lenders for high risk car loans are also reluctant to deal with poor credit customers because it requires specialized training for all employees.
Valley Auto Loans can be your ideal online destination to start looking for hassle free auto loan that satisfies all your needs. We are the number one auto loan service provider in the country with a specialized service for poor credit consumers. Apply today and qualify for your auto loan within just 60 seconds.
According to Experian and Trans Union (two of the three big reporting agencies), as of July, 2013, the average FICO score in the U.S. was 648. They also go on to say that more than 50 percent of the population have one or more dings on their credit reports.
Your credit score is a numerical reflection of your entire credit profile. The three credit reporting agencies (Equifax, Experian, TransUnion) have a so-called “secret formula” for calculating this number.
Risk levels are expressed in ranges. Lets look at how the reporting agencies and high risk loan companies rate each range:
726-850 Very Low Risk
700-725 Low Risk
626-699 Medium Risk
551-625 High Risk
350-550 Very High Risk
So, it’s easy to see that anyone with a score below 626 is considered high risk.
Do you know your credit score? 70 percent of the people don’t, so you’re not alone. Knowing your credit score is advantageous. What if your credit score is 540? You’re only 10 points away from the next higher bracket.
You’ll find that banks and traditional institutions are not good high risk loan lenders.
At Valley Auto Loans we have a network of lenders that specialize in high risk auto loans. We have helped thousands of customers with credit challenges, who came to us dejected and frustrated, because they were having trouble getting a car loan. With a 100 percent acceptance rate, we were able to get these customers the loan they needed.
Here’s the problem with doing it yourself – you can damage your credit even further.
When you put in application after application with each lender, you activate an inquiry against your credit file. Too many inquires in a short time frame can negatively impact your score; unknowingly, you can hurt your credit score even more by doing this.
At Valley Auto Loans we run your application once, which only activates one inquiry. We can then send your application to our loan network to find the best car loan for your needs among our group of auto loan lenders.
Things You Should Know About High Risk Loan Lenders
You need to make an informed decision. We believe in providing you with all aspects of high risk lending. Even though our success rate is nearly flawless in getting loans for high risk customers, there are still some things you should know.
Interest rates will be higher. Looking at it from the lenders point of view, high risk is offset by higher interest rates.
Down payments can be a bit higher. This isn’t carved in stone, but the lender will usually require a higher down payment (10-30 percent) compared to lower risk customers.
Even among high risk loan lenders there’s competition. Since we have a network of lenders, we can help all our high risk customers find the best rates and terms the market has to offer.
Buying a car should be a pleasurable experience. Let us help you make buying your next car a stress free, pleasurable experience by filling out an application by phone or - Apply online today!