Consumer Car Buying Advice Blog

One of the most important things a bad credit car loan lender will look at is your credit history.

Why it’s important

At Auto Credit Express, we know that for many borrowers, a poor credit history means that they will have no chance to get financed. In many cases, their only chance for getting a car will be the local “Tote the Note” or “Buy Here Pay Here” car lot. More than a few bad credit loan buyers who do get a loan will find the rates much higher than normal, making their selection of a vehicle very limited and the vehicle they really wanted to buy too expensive for their budget.

The subprime car loan

If you think both of these choices are questionable, you’d be wrong, because for many subprime borrowers, the bad credit car loan solves a couple of problems – the car they’re financing provides transportation to and from work and, at the same time, it also provides a “vehicle” with which they can reestablish their car credit, rebuild their credit history, and raise their credit scores

The “three Cs”

The three most important things that lenders will scrutinize is your credit history, your down payment and the credit application. All three elements are critical when it comes to either approving or turning down are request for financing.

These elements constitute “the three Cs” of lending: collateral, character and capacity.

In terms of collateral, the lender will look at the type of vehicle being financed. The amount loaned on the vehicle (LTV) should be less than 120% of either NADA or Kelley Blue Book (depending on where you live in the U.S.). Banks will also look at the length of the loan to determine if it fits your credit profile.

In terms of character, lenders separate poor credit histories into two profiles: situational and habitual credit. Situational credit involves a person who has made timely payments in the past, but, due to a sudden, unexpected event such as a divorce, illness or loss of job, finds him or herself unable to finance a vehicle with a traditional loan. Habitual credit, on the other hand, is repetitive problem credit that occurs over the course of many years.

Even though both types of credit are considered poor, someone with habitual credit may or may not get approved. If this person is approved, he or she might find themselves paying the highest of interest rates – which can be as high as 20 to 29 percent.

The bottom line

At Auto Credit Express, our business is to help people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. For more information about subprime car loans, feel free to visit our web site at www.autocreditexpress.com. Once there, you’ll find calculators to help you determine your budget, as well as a loan resource center that can help answer your questions. If you need additional assistance, our toll free number is listed at the bottom of every page and, during normal business hours, it will connect you with one of our knowledgeable customer service representatives.

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