While we’ve discussed many aspects in the past about bad credit car loans, we’ve never really tied the pieces together. Here we will explain the basics.

Who needs a bad credit car loan?

Here at Auto Credit Express, we want you to know what you are getting into with a bad credit car loan. Generally speaking, bad credit – or subprime – car loans are loans extended to individuals with a credit score of 640 or less. Score above 640 and you are in prime or near prime territory. Pretty much anything below this score will put you in subprime finance.

Who are the subprime car lenders?

There are at least 30 national lenders that do subprime and many times that number that concentrate on regional lending. A handful of the national lenders – among them AmeriCredit, HSBC, Chase, Citi and CPS, are publicly-held corporations doing business on one of the major exchanges. The balance of these lenders is privately held. And while a few will lend money directly to buyers, most, because of the paperwork involved, only offer their services through franchised auto dealers.

What about the additional paperwork?

Subprime loans, high risk car loans and bad credit car loans, by their very nature, carry more risk that prime loans. As a result, bad credit lenders will require documentation to prove such things as income and residency. In addition, they may ask for a payment history if you rent or are buying your home on a land contract, since these types of histories are not normally found on credit reports.

What about interest rates?

This is always the big question from most bad credit borrowers and the answer isn’t as simple as it might seem. Your interest rate is based on a number of things and, just as in prime lending, there are different levels of subprime car lending. At the better end of subprime, interest rates can be a few points above near prime rates, while, at the other end, rates can be as high as 25 to 30 percent.

Wouldn’t it be cheaper to go to a tote the note or buy here pay here dealer?

When I first got into the car business, I was taught the difference between price and cost. The price is what you pay for an item. The cost is the total expense of that item over the time that you own it.

You can buy a car at a  buy here pay here lot and the price will probably be less than buying a car through a new car dealer. But while the price is less, the car will be older and will need more in the way of maintenance and upkeep. It’s not uncommon to replace brakes, steering racks, exhaust systems and even entire engines in these vehicles. Since most of these cars are older, any warranties are very limited in what they will cover and how long they are in force. Many of these repairs can double and even triple your original cost. Older cars also tend to be less reliable – especially in the winter months when  you need them most. And finally, most of these small dealers don’t report to the credit bureaus, which means that you’ll be in the same credit position - with no improvement in your FICO score - after your loan is finished, even if you made every payment on time.

How Auto Credit Express can help

There is one other point: not all new car dealers have a special finance department, and many of that that have these departments don’t do special finance very well. At Auto Credit Express, we are experts in bad credit car finance. If our web site can’t answer your questions (we have calculators, a FAQ page and online resources), we have knowledgeable customer service representatives that can. Our toll free number is listed at the bottom of every page. After you fill out our secure online application, it will be sent to the nearest affiliate dealer that specializes in high risk car loans. Remember, we want you “on the road” to better credit.