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When you have bad credit, no one needs to tell you that it can be difficult to find a a car loan with bad credit. With the recent tightening in the credit markets, even people with a few small mistakes on their credit reports have discovered that it can be next to impossible to get a credit card, much less a mortgage or a car loan. Even if your credit is not as good as it could be, though,you more than likely have to have a car, and getting a car loan with poor credit could be the answer.
Many people can relate when it comes to poor credit auto loans. They need a car to get to work, so that they can earn enough money to improve their credit. Fortunately, banks and car dealerships have responded to this need by offering car loans for people with bad credit. If you’re thinking about using one of these loans, however, you should certainly try to understand how they work.
Where do I begin to get a car loan with poor credit?
Most poor credit car loans are available from the same banks that you would apply for a traditional car loan from. These banks work closely with auto dealerships, allow you to apply for a loan at the dealership after picking out the car that you want.
Many times, these loans are not clearly identified as “bad credit” loans, they come up on the dealership’s computer when a person with bad credit applies for a loan; the dealer does not have to ask the system to find a bad credit loan. In other words, people applying for these loans do not have to state that they have bad credit when they start the process of shopping for a loan.
Do I really need a poor credit auto loan?
The first step to figuring out if you need a bad credit car loan is determining if you really need a loan at all. In general, there are three ways to get a car: Pay cash, lease, or get a loan.
Many financial experts state that the best way to buy a car is to pay cash. While it’s certainly ideal to avoid paying interest, the truth is that paying cash for a car is not a practical option for many people. Used cars can cost thousands of dollars, an amount of money that it can take years to save. If you buy a cheap car, chances are you’ll pay much more for emergency repairs and maintenance than you would in interest. When trying to save for something more reliable, you’ll probably have to go without transportation while you save.
Leasing a car is an option that many people turn to because they believe that they will not have to complete a credit application. In fact, most dealerships that offer vehicles for lease will require lessees to go through a credit check. Even if you can get past this hurtle, however, a lease typically requires a down payment and a significant monthly payment. Remember that a dealership will only lease new cars; in other words, you’re paying for the mark-up on a new car, and you don’t get to own it when you’re done paying.
Your last option is to find a car loan. This requires you to make monthly payment, and in some instances a small down payment. After you have paid off the vehicle, however, the car is yours. Of course, in order to get a loan, you have to show a bank that you’re likely to pay it back. If you have a low credit score, it’s possible that you won’t be able to prove this.
How do I know if my credit is too bad to get a traditional car loan?
When people think of their credit score, they typically think of the number assigned to them by one of the three main credit bureaus. By their rankings, people with scores higher than 720 qualify for the best rates on loans, while people with scores lower than 500 typically can’t get a loan at all. Many people find out their credit score when they apply for a credit card. Often, they are told that they don’t qualify for a card, but they’re not told the reason why.
For many years, most car dealerships used this same set of numbers to determine whether or not their customers could qualify for an auto loan. Recently, however, many dealerships have realized that these scores do not give the right information to determine whether or not a person is a good risk or not for an auto loan. There are several reasons for this.
To start, a “standard” credit report treats all loans equally. A missed payment on a credit card is treated the same way as a missed payment on a mortgage. In real life, however, many banks recognize that people who have gone through hard financial times prioritize their debts. Missing a credit card payment is not as crucial as missing a payment on a poor credit auto loan or a mortgage payment.
Secondly, a “standard” credit report factors in the length of your credit history. This is the amount of time that you have been using credit and setting up revolving payment accounts. Many young people who do not have a credit card or any other loans are often told that they do not have a long enough credit history to qualify for an auto loan. People in this category might be perfectly capable of paying back the loan, but the lack of information about their ability to do so means they can’t get a loan.
Obviously, using these credit scores was disqualifying many people from getting an auto loan when they would most likely be able to pay back the loan. For this reason, the auto lending industry started computing their own credit scores. This means that many people are able to secure a car loan with poor credit.
Typically, an auto credit score gives more weight to a person’s payment history on vehicles. That means that someone who has missed a few payments on a credit card but has managed to make full, on-time payments on their previous car loans will probably be able to qualify for a new auto loan, even though he or she may not be able to get a new credit card.
Be sure to apply online now for your car loan from Valley Auto Loans.How to Use Poor Credit Auto Loans to Rebuild Credit by Jordan L Bourland