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Car Loans for People with Bad Credit

Here, we want you to know what you are getting into with a bad credit car loan. Generally speaking, car loans for people with bad credit, or subprime loans, are loans extended to individuals with a FICO 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 into the subprime finance category.

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, Chase, 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 verification paperwork involved, only offer their services through franchised auto dealers.

Yes, there is paperwork. Subprime loans, high risk car loans and car loans for people with bad credit, 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 will my interest rate be?” 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 factors and, just as in prime lending, there are different levels of subprime car loans for people with bad credit. 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.

“Isn’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.

The facts are, 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 service contracts 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 after your loan is finished – even if you made every single payment on time.

There is one other point: not all new car dealers have a special finance department, and many of them that have these departments don’t do special finance very well. Auto Credit Express is a reputable online company that specializes in car loans for people with bad credit. We will try and answer your questions (we have auto loan calculators, a FAQ page and online resources), as well as knowledgeable customer service representatives that can also help you if you need extra help. Once you fill out the secure online application, it will be sent to the nearest affiliate dealer that specializes in car loans for people with bad credit.