Poor Credit Car Loans

The rates you pay for any loan largely depend on your credit score. With poor credit, auto loans are going to come with higher rates and monthly payments. This makes it even harder to shop around for cars and to find the vehicle that you want in your price range. When your credit is good, you have an easier time buying a car, since you do not have to worry as much about financing. Fortunately, there is a way for those with bad credit to work their way toward better subprime or auto loans for poor credit. Valley Auto Loans provides loans to help people rebuild their credit based more on your income and not on your credit score. Most bad credit car loans require proof of income and a secure job.

Starting Out

Poor Credit Auto Loans BankIf you already have bad credit or are a first-time buyer with no credit at all, you may not qualify for financing through a traditional bank. Another possibility could be the dealership’s financing office even though you have the ability to pay. The auto lenders are now using an auto enhanced report offered by the credit reporting agencies called a FICO auto industry option credit score. This score can look very different than your regular credit score because it puts a lot of weight from your past auto loan history on your credit score. If you have had a problem in the past with paying your auto loan, you will probably have a lower score than you think. This does not mean that you have to buy your car from a shady dealership that promises to approve everyone.

 Take your approved loan to any dealer or private seller you like!

However, at Valley Auto Loans, you can still obtain financing for the loan that you need and then go to any dealership to purchase your car. The only limit is to find a car that’s within your approved price range. At first, this sounds like the typical procedure for obtaining auto loans for poor credit but if you have done some comparative shopping for poor credit auto loans you have discovered that auto lenders operate differently. Many guaranteed poor credit auto loan lenders are only given a “loan package” if you use their approved dealers who can only fill out your loan paperwork to their loan terms. Valley Auto Loans will match you to a loan that can be used at a car dealer you choose. Many times the best deal is not found at a dealers lot at all. You even have the ability to purchase a car from a private individual if you like.

Rebuilding your poor credit history is probably going to give you a higher interest rate than you’d like. However, if you play your cards right and follow through on the advice in the rest of this article, you’ll only have to suffer the high-interest rate for a short time.

Making Poor Credit Auto Loans Work For You

The higher interest rates that come with poor credit car loans can be compensated by making a solid choice for you car purchase and negotiating a favorable purchase price. Many times people with poor credit scores will pick out a car and hope for the best when it comes to getting financed. They rely on the mercy of the dealer doing the paperwork to get them a good deal on their loan terms. This concept will cost you your hard-earned money and more time with bad credit.

Proceed With Caution

The dealer makes more if he sell the car at a higher price. They make this look acceptable to you by setting up your poor credit auto loans for longer terms and lower payments. You think you are getting a good lower monthly payment until you realize you have paid on that loan for years, and now the car is falling apart.

Good Deal, Not So Good

You still owe for most of the total cost and selling it to pay off the loan is going to put you upside down. All this because you trusted the car dealer with your vehicle financing instead of getting the right loan from a poor credit auto lender.

Poor Credit Auto Lenders Are A Better Deal

Poor credit auto lenders are motivated to offer loans to you by your ability to pay the loan off in a short amount of time. That is why they look more closely at your steady work income instead of you credit score. They are not motivated by a higher price on the car, and they know a longer loan term increases the risk of you defaulting on the loan because of unforeseen circumstances. Let us show you how to choose the right car, negotiate the best price and select the best auto loan for your situation. Getting a car loan with bad credit is the best way to improve your credit and get dependable transportation, but don’t let yourself get cheated by a dealer trying to make a fast buck.

The Credit Balance

auto loans for poor creditMany poor credit borrowers do not realize that there are two types of loans you might have on a credit report. One type is called, “revolving credit.” This refers to the credit you get from a credit card. It is called revolving credit because the amount you owe and the amount you have to pay each month can vary. The other type of credit is referred to as “installment loans.” These are the times when you borrow a large chunk of money, then make regular payments from month to month until you finally pay it off. Student loans, auto loans, and mortgages are all examples of installment loans. Traditional lenders refuse loans because the applicant is not credit-worthy based on the credit reporting agencies associated with these types of loans.

Check your Credit Report your self for free. Don’t take the word of others, that your credit is poor and you are stuck with high payments.

The credit bureaus look favorably on people who have both types of credit available in their profile. It helps them to see that you are well-rounded and able to handle many types of bills. Credit cards can be relatively easy to get, but it is harder to have installment loans. When you get an auto loan through a bank that specializes in people with poor credit, you broaden your credit report and give the bureaus more information on which to rate you. This could be especially important if you have not had any installment loans on your credit report in the past.

Choose Poor Credit Car Loans That Will Help Your Credit Score Not Just Get You A Loan

So-called “Selected Loan Package Dealers” will be more prone to stuff the car deal with nonessential goods and services. These include extended warranties and service contracts to compensate for the high-risk loan they offer the poor credit customers. If you choose to finance through a car dealer, finalize all terms before you sign a sale contract and take the car off the lot. Many times buyers are informed later that their financing did not go through, and you will need to pay more, or you need to pay more for a down payment. People who fall into this trap usually have to pay a higher interest percentage for auto loans for poor credit.

Add other credit to your score

Of course, if the new auto loan is now the only active thing you have on your credit report, you’ll also want to balance it out with a credit card. Try to find a place where you could get a credit card. This is not always easy if you have bad credit, but you might want to start out by applying through the bank you currently bank with or through a local credit union. If they are turning you down due to bad credit, as a last resort consider applying for a secured card. In this type of credit card, you make a down payment in the range of $200 to $500, and then the bank extends you credit for that amount. After a certain number of months, you are sometimes able to get that deposit back and still use the card, but in some cases, you’ll have to cancel the card to get the deposit back. If you are going this route, be sure to look carefully into monthly maintenance fees or other hidden charges.

Building Your Credit

With an auto loan and possibly credit card under your belt, you are ready to start building your credit score. The good news is that the creditors in the United States report both good and bad behavior, so it will not take long for you to start seeing a difference in your score. In many cases, it will be just a few months before you start seeing slight increases in your score.

poor credit car loansOn-time payments are incredibly important for improving your score, so you want to make sure that you pay those bills on time. Don’t wait until the due date approaches to make the payment. Online payments can sometimes take a few days to process, and the Mail can be slower than you think. Instead, try to send in your payment as soon as the bill comes to you or at least a week or two early. This is where a simple budget can come in handy. This will assure the money will always be ready for the bill when it comes due. It can be helpful to mark the bill-paying date on the calendar or always to pay the bill at the same time each month. Consider signing up for automatic payments if the creditor offers the option. This means that you’ll never have to worry about forgetting to make your payment.

One way car buyers with no credit are trying to build a credit history is by using only a small amount of the credit available to you through your credit cards. Resist the urge to use your credit card to make purchases you cannot afford. Your score will go down if you come close to the limits on your credit cards. Instead, use your credit card responsibly. Make a few small necessary purchases like gas or groceries each month, and then pay off the balance in full. With most credit cards allowing you to view the account and make payments online, it is even possible to pay back the money on your credit card just a few days after you’ve made the purchase. Not only will paying the bill off in full help your credit score, but it will also help you avoid paying any interest charges on the money.

Monitoring Your Score

If you want to get motivated by seeing your hard work pay off, you’ll have to sign up for a service that allows you to monitor your credit score. First, you can view your entire credit history by ordering a copy through AnnualCreditReport.com. This is the government-sponsored site that doesn’t require you to sign up for credit monitoring services. However, it will only show you your report, not your score. When using this site, you would have to pay to see the actual score.

We offer a free credit check where you can get your credit score as part of our helpful resources. There are also other credit card companies that also offer you the option to view your credit score for free. You can also get a good estimate at CreditKarma.com and by using the budgeting site Mint.com. While some sites aren’t usually giving you an actual FICO score, and your “real” score may be a bit higher or lower than the scores they’re showing you, it’s an excellent opportunity to look at the general trend of your credit score. With consistent good behavior, you should see it going up.

If you are interested in viewing the real score from one of the major credit bureaus, order them individually through the AnnualCreditReport.com site. Many other “free” sites require you to sign up for a “monthly trial” of a credit monitoring service. Doing this can be risky because if you forget to cancel it, you’ll get charge around $50 per month for a service you probably don’t need.

Refinancing Auto Loans for Poor Credit

Even with poor credit, you have options. After a year or two of paying your bills on time and being responsible with your credit cards, you should see a significant difference in your credit score. This difference is likely to be enough to get you a better rate on your current poor credit car loans. At this point, it is smart to look into your options for refinancing.

Refinancing your auto loan is a bit like the initial application for an auto loan, except that you do not have the pressure of trying to find the right car along while attempting to find the right loan. You’ll have to ask your current lender to tell you the balance, and this will be the amount that you are financing. You’ll also have to provide the companies with proof of your income and any other types of financial information you had to provide when you first applied.

It is a good idea to start your search with your current lender, Assuming you’ve been good about paying them back. Valley Auto Loans also can find you a refinance lender who will restructure your loan. This option puts your application up in front of several lenders for review without running your credit report several times. Then you can choose the loan you like without any obligation to the loans that you are offered. The good news is that even the poor credit car owners can qualify for a car refinance loan.

Don’t be fooled by lower payments or cash back offers

Don’t be fooled by companies trying to lower your monthly payment by lengthening the term of the loan. If you’ve already paid off two years of a loan that was originally a four-year loan, you ideally want to refinance the loan for a new two-year period. Some companies may offer you options for two, three and four-year loans, but if you do this, you’ll be paying more in the long run. Many companies will offer you cash back to refinance. Don’t be fooled by the “cash back” incentive. If you do not have much equity built up, the money they offer is added to the new loan, and you will probably owe more than the car is worth. You will be upside-down on that loan.

After you rebuild some credit and refinance your poor credit loan to get a lower payment, don’t jeopardize your better credit and lower payment by borrowing cash back on the new loan. If you have moved away from poor credit auto loans or bankruptcy, but you are not in the clear yet. Building and maintaining good credit is something that you should be doing throughout your life. You’ll never have to worry about not qualifying for exceptional rates again, but there’s often ways to improve and get even better rates. Poor credit auto loans are a good place to start rebuilding your credit today.