High Risk Auto Loans: Overview
- 1 High Risk Auto Loans: Overview
- 2 Tips for Getting The Best Deal
- 3 High Risk Auto Refinancing
- 4 Co-signing & Co-signers
- 5 Next Steps
- 6 The Bottom Line
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 your credit. This puts you in a high risk category for lenders to loan you money. Fortunately, when you start shopping for a new auto loan there are lenders for high risk auto loans out there who specialize in subprime auto loans. 1
Valley Auto Loans will connect you with the High Risk Auto Lenders that are right for you. Valley Auto Loans will help you apply on-line for a car loan or refinance the auto loan you already have to put some cash in your pocket. Many of our unique lenders understand the risk involved with high risk loans and can offer lower interest rates to our buyers even if you have bad credit. There is no application fees and no obligation. On the flip side, some lenders may not have your best interest in mind 2 and could even damage your credit further. 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. Protecting their interests means doing the necessary credit check as well as tracking and rating 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 the loan, which is why bad credit lenders take the chances they do.
High Risk Loans: Approval Criteria
Requirements for high risk loans differ from lender to lender. What separates traditional lenders from high risk auto loan lenders has to do with the type of criteria borrowers must meet. Most traditional lenders require that applicants have been on their jobs for at least a year to be approved for a sub-prime loan. Traditional lenders and some of the more forgiving lenders rely heavily on a person’s credit score to decide the risk of the loan. Credit scores provide lenders with an overall view of a person’s financial history. Most common 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 and fail to get the high risk auto loans they need.
With high risk auto loan lenders, no credit financing is common. Though strict conditions apply for auto loan approval, bad credit lenders adjust their conditions to favor bad credit auto loans. Lenders may request a minimum down payment amount of up to 20 percent. Most high risk finance companies will charge a high-interest rate due to the high risk nature of the loan. There are some dealer/ lenders that operate as “buy here/pay here” establishments and handle their own financing. 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 and getting a bad auto loan.
Choosing A Lender
When shopping for high risk auto loans, high risk 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 high-interest rates or longer monthly payments if your credit is bad. Ultimately, borrowers end up paying way too much for way too long on a car loan. This is where secure online quote comparisons and online auto loan calculators can come in handy. You can check our resources page for information about our EMI calculator and how it can help with your car loan purchase.
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 trustworthy high risk lender is a matter of doing a little research and asking the right questions. Good lenders have the best interests of their customers at heart. By taking this approach reputable high risk lenders get repeat business through customers sharing what they have discovered with others. Reputable lenders are listed with the Better Business Bureau along with other consumer advocacy organizations.
A good resource for finding reputable bad credit lenders is ValleyAutoLoan.com. ValleyAutoLoan.com offers a network of affiliated lenders and dealerships from which to choose. We do all the searching for you. Finding the best lender for your auto credit needs. Borrowers can pull up needed information on each lender using a quick and easy search tool. This process makes finding refinance lenders and loans easy with all the needed information at your fingertips.
Tips for Getting The Best Deal
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. Check our resource page to find out how to get a “free” credit score. This is one of the tools needed to go to the high risk auto loan lenders and get the best rate for your situation. On the other hand, if your score is truly horrendous, you may want to reconsider the auto loan. You should clean up your report, build a simple budget, pay off bills and get a good standing with your current credits first.
Before you head out to a car lot to look at cars: You need to have a better understanding of how to buy a new car without getting ripped off. With our help you can look for a good deal on a bad credit auto loan and shop for the right car at the right price. Our resource page also has New and Used Car Buyers Guides with important tips on negotiating with dealers to get the best deal. The New Car Buyers Guide has a quick formula to decide the best price to offer during your discussion with the car dealer.
- Fill out the paperwork completely: Applying for an auto loan on-line has the benefit of allowing you more time to fill out the paper work. You can be at ease in your own home and take the time you need to complete the application. Lending institution will quote your loan based on this information so it is important you double-check all fields to see they are correct before submitting it. To get the most out of the experience, you should give correct information about employment and residence as well as possible. It’s best to get pre-approved online before you go to the dealer or fill out an application over the phone with assistance from our phone operators. If you have a side income, child support or some other form of monthly income, you should total this as income on your application.
High credit auto loans can serve two purposes: getting you behind the wheel of a car and improving your overall credit status. Start with building a Simple Budget to pay your bills and see what monthly payments you can afford. Figure in car expenses like regular maintenance and fuel costs. This will help you see your ability to pay back the loan. Online car finance calculators can be a great help when figuring how much you can afford towards a car loan. Consumers should know that saving up even a small down payment can help lower rates and improve payment terms.
Give A Down Payment
With a bad credit type loan, some loan officers are unlikely to give out at loan to a person in a horrible financial situation and no cash upfront. 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. Our Simple Budget can show you how to get extra money out of your paycheck. Without a doubt, when doing this wisely, you can get a great deal on your loan. Not only that, with a good 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 needs. You should check all options before taking a loan without paying a down payment.
When you have a poor credit score and want to get a car, you may have to offer some flexibility on your purchase. 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. At the same time, when getting a car, you should not accept everything offered. 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, apply for your loan first, then pick the car that matches the loan amount. You can get a great deal on your loan and walk out with the car of your choice.
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 simple mid-sized cars, you can get a great deal and enjoy something that will not kill your monthly cash flow. You can buy an inexpensive car offering safety and reliability.
Get A Cosigner
If you have poor 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. You can avoid a lot of problems getting qualified for your loan as many with extremely poor credit experience. 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 problems in your relationship. Simply put, this should be a last resort. It is a great option if you simply want to do whatever it takes to get a car and can make the payments.
Clean Up Your Credit
Lastly, if you have no other options, you may want to consider cleaning up your credit score. If you have an extremely low one, you will have a hard time getting a loan. 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. 3 Other times, if you have some money, 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. Sometimes, there might be mistakes on your report and you can resolve the problem by calling the bureaus and removing incorrect items on the report. With better credit in the future, you can at least, apply online to refinance your auto loan and get a better deal.
High Risk Auto Refinancing
Applying for a refinance auto loan may seem like a strange concept to many. But maybe, the original loan is 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 first auto loan. If you choose to work with Valley Auto Loans, who provides auto refinancing for poor credit, you can reduce your interest percentage and monthly payment amount significantly. They have a knack for getting funds to people who are incapable of receiving loans.
- High risk car loan lenders offering car loans to drivers with terrible credit problems is a very smart move. Because of the challenging economy, huge groups of people are struggling to keep up with basic expenses. Many of these people 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. It would be ideal if these marks went away after you paid these debts in full.
Unfortunately, they don’t, 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 car loan providers are serving a group of people who were left out of the traditional lending process. In addition to rewards from obtaining mass amounts of business, they also get to help unfortunate people who need immediate help. Through second-chance financing opportunities, these lenders can provide assistance in one of two ways. They can find funds for people 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.
Have Your Info Ready
You will need to provide some personal information to shift your current loan to your new financier. You will definitely need to present all 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 free credit report from one of the three giants…or credit reporting agencies known as Experian, Equifax, and TransUnion.
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 is 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. 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 duration. 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 $7,000 and up:
- 36 month leases will have interest rates of about 3.65%
- 37 – 48 month leases will have interest rates of about 3.65%
- 49 – 60 month leases will have interest rates of about 3.25%
- 61 – 72 month leases will have interest rates of about 3.50%
- 73 – 84 month leases will have interest rates of about 3.65%
What does this mean in dollar value? An individual with a $10,000 loan will have an interest rate of 20% with a normal lender, which adds up to $2,000 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 $1,270 per year, which is a very hefty sum. Over a 60 month period, this $1,270 will turn into $6,350 in savings.
It is best to apply with a refinance company that deals with high risk borrowers. Prepare yourself to collect 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 extremely 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 else’s high risk car loans, they really need to know as much as possible about the situation. They also need to know about 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 ensure that everyone is fully informed before taking on such responsibilities. In some cases, a loan applicant can be denied for high risk car loans due to their poor credit. In this case, a person with good credit must become a co-borrower and step in to offer their credit as an alternative. I most cases this type of loan will not help the borrower to re-establish good credit. 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.
- Both types are responsible for the loan and are considered co-buyers, with the car buyer. If the primary borrower fails to meet the loan requirements, co-buyers and co-signers then must make the loan payments.
- Both types must place their signature on the loan contract.
- Along with the primary borrower, both types can be sent to a collection agent if the loan goes unpaid.
- The lenders for high risk car loans will review the credit of both the borrower and co-borrower.
- Lenders name a co-borrower as either a co-signer or a co-buyer based upon their income compared to the primary borrower.
- 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.
- A co-signer’s income cannot be added to the primary buyer’s. 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 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). 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 disappoint those with poor credit. Don’t be disappointed if you have been turned down before. People with credit problems can take several corrective measures to increase their chances for approval in the future.
Our efficient auto loan approval system has helped thousands of credit challenged consumers qualify for their auto loans with excellent interest rates.
Finding Dealers to Work With
Valley Auto Loans can be your ideal online place to start looking for hassle free autos 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 “secret formula” for calculating this number.
Risk levels are described 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 helpful. What if your credit score is 540? You’re only 10 points away from the next higher bracket. while you are here why don’t you get your credit score for free. Check our resource page to find your free credit score facts.
High Risk Auto Loan Lenders
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 send your application to our loan network center to find the best car loan for your needs among our group of prime auto loan lenders. After review, the lender chosen will run your credit check once, which only activates one inquiry. Our approval process gives you the benefit of having your application reviewed many times with lenders competing for your business, with only one credit check.
You need to make an informed decision. We believe in providing you with all aspects of high risk lending. Even though we have a high success rate 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 great experience for anyone, regardless of your credit. Let us help you make buying your next car a stress free and easy experience by filling out our high risk auto loans application today!