As dealer backend products go (backend products are those things the dealer business manager is in charge of selling), we can think of at least two situations in which at least one of them, gap insurance, might make sense. This is especially true if you have less than perfect credit and, believe it or not, are on a tight budget.

We’ve come to this conclusion here at Auto Credit Express after over twenty years of helping consumers with credit issues find a dealer that can get them approved for a car loan.  Our website is even designed so that applicants can research all aspects of the bad credit auto sales process including today’s topic, the pros and cons of gap insurance.

Understanding gap insurance

Although gap insurance is never a requirement in qualifying for an auto loan and you should never believe anyone who tries to tell you it is there are times when choosing it can be the right decision.

That’s because until the last payment is made, your car really belongs to lender.

While it’s being financed, if you’re involved in an accident with your car other than one involving a total loss, your full coverage car insurance (required by the lender) will pay to repair any damage, less the deductible.

At the same time, if you’re involved in an accident where the car is declared a total loss, the insurance company will typically pay its retail value (possibly less any deductible) at the time of the accident.

The only problem with a total loss accident is that if it occurs any time during the first half of the loan term or even further depending on the size of the down payment, the insurance settlement could be thousands of dollars less that the loan payoff amount.

If this happens, payments must continue until the remaining balance is paid in full.

Admittedly this is a worst case situation but it can and it has happened. This is also where gap insurance coverage pays off.

If you have it, the insurance company will pay the difference between the insurance settlement and the balance owed on the loan (less the deductible – although if you weren’t at fault, in many states your car insurance company will cover this as well).

When gap insurance is needed

Gap insurance doesn’t make sense if:

•    You have a short-term auto loan (36 months or less). In this case you’ll be in an equity situation fairly quickly.

•    Your down payment is 20% or more. There’s a good chance you’ll be in an equity position with most car loans – especially for terms of 60 months or less.

On the other hand, in just about every other situation it usually makes sense to at least consider gap insurance.

As we see it

There are at least two instances where purchasing gap insurance means means avoiding possibility of paying thousands of dollars to a lender for a vehicle that’s damaged beyond repair – a loan term of over 36 months or a loan in which the down payment is less than 20% of the selling price.

At the same time, we want you to know that if you have poor credit Auto Credit Express will forward your information to dealers that understand this situation and can offer you your best chance for an auto loan approval.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.

Regardless of your credit situation it’s always a good idea to consider the total cost of a new car over time.

This is even more of a concern if you have poor credit. We understand, since for over two decades here at Auto Credit Express we’ve been helping credit-challenged applicants find a dealer that can get them approved for a car loan. Our website reflects this experience on topics such as credit repair as well as today’s issue, choosing an affordable car once you’ve received a loan approval.

Kelley Blue Book

According to Kelly, “The cost of owning a car over several years can easily exceed the initial purchase price and vary greatly from car to car.”

In compiling this information, Kelley uses “real-world data updated every 60 days,” which makes this information even more accurate for car buyers. The five-year cost figure includes depreciation, fuel, insurance and financing (although this last figure will be more for car buyers with less than perfect credit).

“With Total Cost of Ownership information, consumers can better understand the financial implications associated with the initial five years of owning a car,” said Juan Flores, director of vehicle valuation for Kelley Blue Book.  “As Kelley Blue Book’s data reveals, depending on the model’s MSRP, fuel costs and other financial factors, other models on their consideration lists could offer a greater value over time.”

Five year ownership costs

Here are the rankings of their current top five vehicles, along with their five-year costs of ownership:

Rank    Model                  5 Year Ownership Cost
1    Nissan Versa            $26,186
2    Hyundai Accent        $26,884
3    Toyota Yaris               $27,330
4    Kia Soul                      $28,203
5    Ford Fiesta S             $28,355

“As an analytic powerhouse, Kelley Blue Book would be doing a disservice by not sharing this valuable information,” said Flores. “Because cost of ownership can vary significantly from car to car, car shoppers should be aware of everything their purchase entails before making a final decision on which new vehicle to buy.”

As we see it

Picking the right vehicle is especially important for people with bad credit since, for many of them, a car is the largest purchase they will make. This means the vehicle not only has to meet their transportation requirements, it also must be affordable to own. If you are one of these individuals, we hope this information helps you in the decision process.

You should also know that at Auto Credit Express we assist people with credit issues in finding a dealer that can offer them their best chance for an auto loan approval.

So if this is your situation and you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.

In order to regain or establish your auto credit you may need to work with one of the subprime auto lenders that offer approved auto loans to credit-challenged individuals.

We know this is usually the case because since 1992 we’ve spent a great deal of time helping car shoppers with less than perfect credit here at Auto Credit Express. We even created a website so that applicants could research such subjects as certified used cars as well as today’s topic: why it is sometimes necessary to take out a high-risk auto loan in order to reestablish your car credit.

High risk car loans

You may be wondering why you should even apply for a car loan from a subprime lender. After all, paying cash for a vehicle, while using a regular or secured credit card, can often improve your credit scores.

The fact is doing this probably won’t help your auto credit, even if it improves your FICO scores.

The reasoning behind this is that any type of credit card is a form of revolving credit. With revolving credit if you don’t pay off card balance every month, you are allowed to carry over the remaining balance to the next month.

An auto loan, on the other hand, is a type of installment credit. With this type of loan you sign a contract to pay back the initial amount, plus interest, for a fixed payment each month over the loan term.

Another difference that separates installment credit from revolving credit is that installment loan balances are typically higher than revolving credit limits. Installment loans also carry a higher monthly payment as a percentage of the loan balance and are much less flexible to changes. This means installment buyers have to be more disciplined in paying back the loan.

Credit scores

In determining your credit scores, FICO looks at both types of credit. Automotive lenders also look at both credit types but pay special attention to how applicants have paid on installment auto loans. This means that while a good payment history with a credit card will help your credit scores, it doesn’t carry as much weight when applying for a car loan.

For this reason, even auto loan applicants with decent credit scores are sometimes turned down if they’ve never had one or if it turns out they had a spotty payment record with a previous car loan.

Either way, these individuals might have to first prove themselves by establishing their car credit with a lender willing to take a greater risk.

But if this is the case and you’ve been turned down for a traditional auto loan, where do you find a dealer that’s signed up with these types of lenders?

Our job

Before visiting a tote the note dealer, you should know that Auto Credit Express works with dealers that understand a broad range of credit issues and can offer you your best chance for approved auto loans.

So if you’re ready to establish your car credit, you can begin now by filling out our online car loans application.

People who depend on tips for much or all of their income often face a number of problems when applying for an auto loan.

This can be a problem especially for credit-challenged individuals and we’re aware of this here at Auto Credit Express because we’ve spent the last two decades helping people like this get approved for car loans.

So here is what we’ve learned:

Tip income reporting

People who receive tips don’t always accurately report this income on their tax returns. They don’t do it because it saves them money on their taxes. But it can also prevent them from getting an auto loan if their credit is, shall we say, less than stellar.

Here are four things the IRS wants you to know about tip income:

1. Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes.

2. Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.

3. Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.

4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tip income.

Proving income

With that being said, while traditional lenders usually don’t verify income, this isn’t true for those involved with high-risk borrowers. As far as they’re concerned, if the income isn’t listed on a W-2 or a professionally prepared tax return, there is no proof. This holds true even if there are supporting bank records that show the claimed income.

Income conditions

Non-prime lenders typically have minimum monthly income requirements. This income, along with all monthly bills, is used to compute a debt-to-income ratio and determine a car budget. This can affect people with tip income in two ways:

1. If the income reported on a tax return is too low, the loan application will not be approved.

2. If the income is sufficient but the monthly bills are too high when compared to the reported income (typically because the actual income is higher) the loan application will also not be approved.

The Bottom Line

If you have poor credit and receive tip income, the only solution is to report all of it on your tax return. If you don’t, it could prevent you from getting an auto loan approval.

If you have been turned down for a conventional auto loan here at Auto Credit Express we’ll help you find a dealer for your best chance at an auto loan that can help rebuild your car credit.

So if you’re looking to get your auto credit on track, you can begin now by filling out our online auto loans application.

Car shoppers now have the ability to pull up a vehicle history report on many smart phones, something that could be especially important to buyers with bad credit.

We understand the importance of this because here at Auto Credit Express for over twenty years we’ve been helping people with credit issues find a dealer so they can get approved for a car loan.  Our web site is even designed so that applicants can research all aspects of the loan process including today’s topic, vehicle history reports.

Understanding vehicle history reports

One of the keys to a successful car loan, especially if you’re credit-challenged, is in trusting that the car you’re buying is exactly what the seller says it is.

If it’s a used car, one way to be sure this is the case is a vehicle history report.

Late last year Experian, the provider of the AutoCheck vehicle history report, announced that it had launched AutoCheck Mobile for Consumers, an application providing used car buyers with access to these reports through both Android and iPhone devices – the first major vehicle history provider to do so.

Report costs

Just like their web-based service, the cost is $29.99 for a single report or $44.99 for an unlimited number of vehicle history reports over a 30 day period.

According to Experian, “The application can be downloaded at no cost through online application stores for Android and iPhone mobile devices. After launching the application and entering AutoCheck account log-in information, users enter a vehicle identification number (VIN) or simply use the device’s camera to take a picture of the VIN to view the vehicle’s history.”

The first step

Be sure to run a report on any used car you’re seriously considering. While this type of report doesn’t always contain all the information on a car, it’s a good start.

Once you’ve narrowed it down to the vehicle you want, there is one more thing you should do.

Physical vehicle inspection

If the vehicle history report is clean, you should then ask the seller if you can have it mechanically inspected. You should then take it to an ASE certified master mechanic to have this service performed.

This service is offered by both individual mechanics and vehicle inspection companies. The cost typically runs between $100 and $200, but consider it money well spent, as a vehicle with hidden damage not appearing on a vehicle history report could cost you thousands of dollars in repair bills as well result in a lower resale value at trade in time.

If the seller refuses, you should just walk away from the deal.

The Bottom Line

A vehicle history report can be a valuable first step in deciding which used car to buy, as long as it’s followed up by a proper physical inspection. By creating an app for iPhone and Android smartphones, the folks have made it even more convenient for you to do this.

Another thing that’s easy to do, especially if you have poor credit, is to apply for an auto loan at Auto Credit Express, where we’ll forward your information to dealers that understand and can offer applicants their best chance for an auto loan approval.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.

If you are someone who’s responsible for or receives child support income you should be aware of how this will affect your application for an auto loan, especially if your credit scores are poor.

We know this to be the case because since 1992 here at we’ve been helping applicants with less than perfect credit get approved for a car loan. Our website, in fact, is even designed so that individuals who have been turned down for conventional auto financing can better understand the subprime car loans process that includes today’s topic, how child support can impact qualifying for a loan in the first place.

Child support income issues

To begin with, lenders who deal with high-risk car buyers have a problem from the very start if all or even some of their income is a result of child support payments. The main reason it’s an issue is because child support income cannot be garnished.

This means that if someone with child support income has their car repossessed, the lender can’t get a court order to take that particular income to pay off the loan. As a result, these lenders are especially careful when considering applicants with child support income.

But there are at least two situations when these lenders typically might consider someone with this kind of income:

1) If the borrower has additional income from a job or other source that can be garnished (the longer the job time and the higher this income, the better the chance for an approval).
2) If there are contributing factors such as long-term residence stability and “situational” versus “habitual” poor credit (when the situation is

a result of a single issue, such as a medical problem, instead of a history of never paying bills on time), this can also help increase an applicant’s chances.

Proof of child support income will also be required. In most cases, copies of the court order or divorce decree stating the amount and length of the payments will need to be provided to the lender.

Child support payment issues

If someone is required to make child support payments and they’re behind, it’s also difficult to get an approval. The reason is simple: people in this situation tend to change jobs frequently. As a result, when the court finds them at an employer and begins to garnish their paychecks to cover back payments, they leave and look for another job just to avoid garnishment.

A judgment for delinquent child support payments also appears on credit reports. After reviewing this information, most lenders will automatically reject the application.

But even in this case, it’s possible something can be done.

If a delinquency exists but arrangements have been made with child services to catch up and this can be proven with written documentation from either child services or the court, then some lenders will still consider the loan application.

As we see it

Child support income or payment delinquencies can be a problem with any car loan, but they’re even bigger issue for people with low FICO scores. To improve the chances for an approval, bring in the proper documentation during the first visit to the dealer.

Also understand that at Auto Credit Express we assist people with credit issues in finding a dealer that can offer them their best chance for an auto loan approval.

So if this is your situation and you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.

Here at Auto Credit Express we’ve spent a great deal of time over the past twenty years helping car shoppers with less than perfect credit find a dealer that understands these situations that can help get them approved auto loans. We even designed a website that contains a resource section on topics such as repossession and basic car loan requirements.

And while we also offer suggestions on how to repair credit, we recently came across an article from the U.S. Government’s web portal that seems to sum up perfectly the process of improving your personal credit.

This is what it had to say:

5 Steps to Help You Improve Your Credit Score

So what should you do if you want to improve or maintain a good credit score? The following tips might help.

1) Request a free credit report

You can request a free copy of your report every 12 months from each of the three main credit bureaus: Equifax, Experian and TransUnion.

The official website to get your free credit report is www.annualcreditreport.com.

2) Understand Your Credit Report

Understanding your credit report will help you make better decisions when it comes to your finances, because your credit score is based on your credit report. It includes personal information about you such as:

•    Your payment history.
•    How many loans you have and how much you owe.
•    If you have ever filed for bankruptcy.

3) Check Your Credit Report

Sometimes information on your credit report might be incorrect or incomplete. That’s why you should check it periodically.

If you do find a mistake, these agencies must:

•    Investigate the discrepancy usually within 30 days and correct it if necessary.
•    Notify the company that provided the incorrect information.
•    Provide you with a free copy of your credit report if changes are made.

The Federal Trade Commission has more detailed information on how to access free credit reports.

4) Pay Your Bills on Time

Paying your bills on time is an important factor in determining your credit score and showing your creditors that you are a responsible consumer. But there are other factors that might impact your credit score:

•    Be selective when you apply for credit as too many applications may negatively affect your score.
•    Don’t go over your credit limits. In fact, it is better to stay well below them.
•    Pay down your debt with regular payments.

5) Get Professional Help

A budget might help you pay your bills on time. If you owe too much or are unable to pay your bills, you might want to consider a credit counseling agency. They can help you to manage your finances or figure out a plan to pay off your debt.

Be careful when seeking out these services, they might charge excessive fees and that can put you deeper in debt. The Federal Trade Commission has more information about credit counseling agencies and how they can help you improve your credit score.

One more thing

In some instances, just raising your credit scores won’t qualify you for a traditional car loan.

If this happens, before you visit a tote the note dealer you should know that at Auto Credit Express we work with dealers that understand a broad range of credit issues and can offer you your best chance for approved auto loans.

So if you’re ready to establish your car credit, you can begin now by filling out our online car loans application.

If you’re credit-challenged, how and where you apply can often mean the difference between driving that new car and being denied credit.

We’re very familiar with this issue here at Auto Credit Express because we just happen to have spent the last twenty years working with car buyers with poor credit. Our website is even designed so that car shoppers with low FICO scores can research such topics as repossession as well as today’s subject, the best way to apply for an auto loan especially for buyers with less than perfect credit.

With that, there are typically three ways car buyers, regardless of their credit standing, can apply for a loan.

The direct method

The first option is applying directly with a lender. Visiting a bank and applying with a lending officer or going online to the lender’s website are just two of the ways this can be done.

Both will work if you have good credit, but if your credit scores fall below a 640 FICO it’s not that simple.

Because nearly all subprime auto lenders have documentation requirements (employment and income to name just two) most lend only indirectly through franchised new car dealers. This being the case, applicants needing these types of loans will find that applying directly will not only be difficult, but with the limited choices they could end up with a much higher interest rate.

The indirect method

A second choice car buyers have is applying indirectly for a car loan at a dealership. This also works if you have good credit, since you compare the dealer’s rates with those offered by area banks and online.

If your credit scores aren’t that great, however, this can be a hit-or-miss situation since not all new car dealers are interested in helping customers with credit issues.

Targeted web site method

For buyers with credit problems, a third option is applying online at a specialized web site that caters to people with challenged credit. The chances of getting approved with this method depend upon the size of the site’s dealer network and its transparency.

The bigger the network, the better your chances are of finding a dealer.

Transparency, on the other hand, has to do with the website, itself. Is the online credit application secure? Does the company belong to the Better Business Bureau and, if so, what is its reputation? Is there a resource section where you can learn about the loan process along with finance calculators to help you determine if you even qualify for an auto loan?

Last but not least, is there a toll free number you can call where you can to speak to an in-house customer service representative and have your questions answered?

If it doesn’t have all these features, you might want to consider one that does before submitting your personal information.

When we can help

The Auto Credit Express web site will assist you in finding dealer for your best chance for an auto loan approval that can help rebuild your car credit.

So if you really want to get your auto credit on track, you can begin now by filling out our online application.

Quite often credit-challenged applicants want to know if there are quicker or easier ways to fix bad credit.

And while everyone’s credit situation is different, we know it usually takes time to do this because here at Auto Credit Express we’ve been working with car shoppers with less than perfect credit for the last two decades. It’s also why our website contains information on issues ranging from no credit auto loans to today’s topic, debt settlement.

Questions about debt settlement

But since we’re not experts on the topic, we’ll turn to those who are.

Not that long ago the Illinois CPA Society issued a press release dealing with this very topic. Here are some questions and answers it contained:

How Does Debt Settlement Work?

Simply stated, debt settlement is an approach to debt reduction in which the debtor and the creditor agree on a reduced balance that will be regarded as payment in full. A credit company must have a solid reason to believe that you are actually unable to pay them before entering into a debt settlement agreement. Unfortunately, you prove this by not paying them which is an instant black mark on your credit score that doesn’t go away for seven years. Once you’ve proven you can’t pay them, you must negotiate a balance you can pay. The debt doesn’t go away, it just gets lowered.

What are some of the Consequences of Debt Settlement?

In addition to having already hurt your credit score by non-payment, you must pay the negotiated balance immediately. Also, any debt that is forgiven is considered income – and you will have to pay taxes on that income.  

Are There Alternative Solutions?

You can call your credit card companies and ask them to reduce your rate. Point out that you’ve been a loyal customer who’s paid on time in the past. If the first person you speak to isn’t authorized to lower your rate, ask to speak to a supervisor.  Be persistent and assertive.

Also try to get rid of your payments faster by trying to pay more than the minimum; even $5 makes a difference.

How do you get on top of already large minimum payments?

Cut out extras to make it work and pay your credit balances down first – no more premium cable, expensive data packages on your phone or eating out too many lunches or dinners. What you save goes to paying your credit card.  Also consider selling through consignment shops or eBay things you bought but aren’t using.  Look at your budget and lifestyle carefully to see where you’re living outside of your means and identify where you can cut back.

The Bottom Line

As the Illinois CPA society puts it, “Debt settlement is a serious decision with serious repercussions. It’s important to think beyond your current situation. With debt settlement you’ll have a black mark on your credit report that could keep you from any number of new things you’d like in the future – a house, apartment, job or car.”

Also keep in mind that if you have auto credit issues and you’ve been turned down by a traditional lender, you have more choices than just a tote the note dealer.

That’s because here at Auto Credit Express we work with dealers that understand a broad range of credit issues and, even with poor credit, can offer you your best chance for approved auto loans.

So if you’re ready to establish your car credit, you can begin now by filling out our online car loan application.

Credit-challenged car buyers needing a bad credit car should understand why a rent to own program won’t help their credit situation while some other finance programs will.

We understand their confusion here at Auto Credit Express because for over two decades we’ve been helping applicants with low FICO scores find a dealer that understands these credit situations. We even designed our website so that people with poor credit can review issues such as bankruptcy and income requirements as well as today’s topic, understanding the difference between the loans our dealers offer and those who advertise rent to own cars.

Car leasing

With traditional new car leasing, the payments are lower than retail auto financing because you’re only paying for the portion of the car that you use.

This means that for a 2 year lease, you’ll pay 24 months of interest charges plus the vehicle’s depreciation during that same period.

Since a typical new car lease doesn’t require a down payment, the person leasing the vehicle is usually “upside down” (the vehicle is worth less than the buyout) during the entire lease term. As a result, lenders consider leasing to be a higher risk than retail financing and usually offer this option only to the most qualified applicants – customers with very good to excellent credit.

Rent to own

Rent to own cars, on the other hand, are similar to a typical buy here pay here finance program. As such, loans taken out at a rent to own car lot require a down payment plus a fixed number of weekly or bi-weekly payments (with a small buy-out at the end of the contract). Like in-house financing programs, these payments are usually made in person at the lot where the car was rented.

Customers who fall behind in payments or who encounter other issues deal with the rental company regarding any payment arrangements. Failing to follow the terms of the rental contract will result in the rental company repossessing the car.

Like most tote the note dealers, the rental company has the option of whether or not to report loans and payments to the credit bureaus. Most do not. Not only that, but the vehicles available for rent are typically older used cars because most of these rental agencies are not franchised new car dealers.

The good and bad

Good:

•    Most rental vehicles are in the moderate to lower-price range and some people actually prefer to make payments on a weekly basis.
•    Rental payments are made face to face so you know your agent.
•    Many rental companies won’t run a credit check before renting you a car.

Bad:

•    Rent to own car companies typically won’t report loans or payments to the credit bureaus.
•    Because these rental vehicles are usually older, many are not that reliable. In addition, for many people, it’s usually not convenient to visit the rental agency every week to make a payment.
•    Rental terms typically range from 12 to 24 months, limiting the vehicle selection to lower-priced, older cars.

As we see it

Car buyers with poor credit scores shouldn’t confuse the term “rent to own” or dealers offering used car leasing with traditional new car leasing.

If you’re interested in cheap transportation without a credit check, then the rent to own cars dealer wins. But even with a credit score below a 640 FICO or a credit rejection from a traditional lender, you should only consider a rent to own or buy here pay here dealer after you’ve checked out another option.

We offer that option here at Auto Credit Express where we’ll help you locate a dealer for your best chance for an auto loan approval that can help rebuild your car credit.

So if you really want to get your auto credit on track, you can begin now by filling out our online auto loans application.