When You Need to Find a Lender for a Bad Credit Loanby Steve Cypher on Tuesday, January 22nd, 2013
Car buyers with poor credit scores often have difficulty finding lenders that are willing to work with them.
At Auto Credit Express we are very familiar with this situation because for the last two decades we’ve been helping car buyers with auto credit challenges find dealers that can offer them the best opportunities for approved auto loans.
So why do we help them find dealers and not lenders? Glad you asked.
Subprime auto lenders
Most banks and other lending institutions that offer high risk car loans to consumers with credit issues are, for the most part, indirect lenders. This means that rather than loan money directly to car buyers, these lenders work through new car dealers that have signed up with them.
These dealers not only submit credit applications from potential car buyers, they’re also responsible for pre-screening these applications as well as collecting the documents these lenders require for income and residence verification.
While it’s easy enough to find used car lots that work with most bad credit buyers and advertise “car financing for all”, most of these turn out to be buy here pay here dealers (BHPH). These dealerships, where practically anyone can get financed, don’t report car loans or payments to the credit bureaus. This means that while these buyers will have at least temporarily solved their transportation issues their credit reports won’t reflect the fact that they’ve had a car loan and most of these buyers will find themselves in the same situation the next time they need a car.
Another issue has to do with size. Since most tote the note dealers are small used car lots not affiliated with a new car franchise, the vehicles they offer typically consist of older, high-mileage cars that may be unreliable and are covered (if at all) by a very limited, short-term warranty.
Yet another negative: a high percentage of BHPH loans end in repossession.
Issues with new car dealers
At the same time, many franchised new car dealers don’t want what they consider to be the hassles associated with customers that have experienced credit problems. In all fairness, though, it should be pointed out that unlike traditional banks, dealing with subprime auto lenders requires special training for dealership employees. To top it all off, dealers who sign up with these higher risk lenders also have to stock the right types of vehicles. As such, many dealers simply lack the experience or the patience to maintain a special finance department.
Turning to the internet
The internet not only has changed the way buyers shop for cars, but also how those with limited auto credit (and even low FICO scores) can find dealers willing to help them.
For example, websites such as ours match the needs of customers with dealers that are signed up with a broad range of lenders. These dealers offer a number of advantages over BHPH car lots including:
1. Much larger inventories of eligible vehicles
2. Vehicle inventories consisting of new or newer used vehicles with lower miles (due to strict lender requirements)
3. Most of these vehicles are eligible for new and used car service contracts that can typically cover all or most of the loan term, helping buyers avoid expensive repair bills
4. These lenders report loans as well as payments to the credit bureaus allowing buyers to establish their car credit and raise their credit scores.
The next step
Now that you’ve seen the advantages, we want you to know that here at Auto Credit Express we match applicants with car credit issues with dealers that can arrange for auto loan approvals.
So if you’re ready to take the next step, you can start now by filling out our online auto loans application.