Consumer Car Buying Advice Blog

There is a big difference between bad credit car loans and rent to own autos even though both loans are made to credit challenged consumers

Our background

At Auto Credit Express we’ve spent the last 20 years working with consumers who have bad credit and helping many of them raise their FICO scores and reestablish their car credit by filling out our online bad credit car loan application and financing a vehicle through our nationwide network of dealers that specialize in second chance auto loans.

One of the keys to successfully reestablishing your credit is an understanding of how the bad credit car loan process works as well as the differences in the types of lenders and lending programs available to consumers with bad credit.

Here is one of those programs and how it compares to what Auto Credit Express can offer you once you fill out our online bad credit car loan application:

Rent to own autos loan

Put simply, a rent to own autos loan is a type of car loan that you take out at a rent to own autos car lot. It consists of a down payment plus a fixed number of loan payments. The payments on the loan are due every week and are usually made in person at the lot that you rent the car from. You rent the vehicle from the company that owns it.

If you fall behind on your rental payments, it is the rental company that you talk to regarding other possible payment arrangements. If you stop making payments, it is the rental company that will repossess the car. The rental company also has the option of whether or not to report your rental payment history to the 3 major credit bureaus. The rental companies that offer these services generally rent only used cars – very rarely do they rent new cars. Normally these businesses are not affiliated in any way with any type of franchised new car dealer.

Advantages of rent to own: The cars are usually less expensive. Many people prefer to make payments on a weekly basis. Rental payments are made face to face so you know your agent personally and they know you personally. Many rental companies don’t bother with a credit check before renting you a car.

Disadvantages of rent to own: Most rent to own companies do not report payment histories to the credit bureaus. The cars offered for rent are usually older and have high mileage and, as a result, some of these cars are not that reliable. For most people, it is not convenient to visit the rental company every week to make a payment. Rental terms usually range from 12 to 24 months, necessarily limiting the vehicles under the rental agreement to lower-priced older cars.

Bad credit car loan

This type of loan, sometimes called a second chance car loan or a credit repair car loan, is usually available only thru a franchised new car dealer. The car that you are financing can be either a new car or a used car (sold through the dealer’s used car lot). Although the dealer sells you the car, the finance contract is sold to a bank.

There is normally a down payment plus a fixed number of loan payments. The loan payments are made to the bank once a month, usually by mail but sometimes by electronic debit from your bank account. Since the bank holds the finance contract to your car, any issues of payment or non-payment are made with the bank.

Most of the bad credit car loan lenders that do business with franchised dealers will report your payment history to the 3 major credit bureaus. As an added advantage, you can even apply for this type of loan online. Our web site, www.autocreditexpress.com, allows you to complete a car loan application in the comfort and privacy of your home.

Advantages of a bad credit car loan: Most subprime lenders report to the 3 major credit bureaus. This is important if you are trying to repair your credit history and re-enter the prime loan market. The selection of vehicles from a new car dealer is greater. The vehicles are, generally, either new with no miles or newer used vehicles with lower miles. Loan terms start at 24 months and can extend to as many as 60 months or more, making these newer and more reliable vehicles more affordable.

Disadvantages of a bad credit car loan: Not all franchised car dealers offer this service and the level of experience and expertise in their finance departments can vary widely. The selling price of the cars is usually higher, due to inventories of newer vehicles with lower mileage. Interest rates are still high, due to the nature of the loans. Any problems with repayment will be reflected in your credit report and your FICO score.

As we see it

If you are interested in cheap transportation that doesn’t require a credit check, then the rent to own company wins hands down. However, if you are seriously interested in repairing and re-establishing your credit, the bad credit car loan is the obvious choice. Here at Auto Credit Express, we have helped thousands of customers re-establish their credit while driving dependable new or newer used vehicles. To avoid the disappointment of not finding a dealer that offers a professional approach to special finance bad credit car loans, simply fill out our bad credit car loan application to begin the process of rebuilding your credit.

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