The surest way for consumers with bad credit to once again qualify for an auto loan with regular interest rates is a bad credit auto loan
How to begin
If you have bad credit, you may be wondering what auto credit repair options will most quickly allow you to reestablish your car credit so you can qualify for a car loan at prime or near-prime rates. We're familiar with this, because at Auto Credit Express we've been working on the retail level with car buyers that have poor credit for over twenty years.
After seeing the embarrassment and obstacles that customers with bad credit often face, we even developed a web site that features a bad credit auto loan application. We then match applicants with dealers near them that specialize in customer credit issues and using lenders that look for ways to get you approved, instead of turning you down due to a low credit score.
The alternative for most bad credit buyers, financing a vehicle from a tote the note, we finance anyone car dealer, can be a problem because these dealers usually don't report car payments to the credit bureaus. This means the next time you apply for a loan, you may very well find yourself in the same position you are now.
At the same time, taking out a loan through a dealer with a bad credit lender without knowing what you're doing can also create problems. Both instances, by the way, can result in repossession.
Choosing a bad credit auto loan
You may be asking, “Why should I get a bad credit car loan? I can pay cash for a car and get a credit card to rebuild my credit.” This might work, but there is at least one reason why it probably won't, even if using your credit card does raise your credit score. Here's why:
Revolving and installment loans
A charge card is a type of revolving credit. This means that if you don't pay off the balance every month, the credit card company will allow you to carry over (revolve) the remaining balance to the next month – while charging you interest for this privilege.
A car loan is a type of installment credit. With an installment loan, you sign a contract that states you will pay back the amount borrowed, plus interest, at a fixed payment each month during the loan term (say $300 per month for 48 months). As a rule, installment credit limits are higher than revolving credit limits and require a higher monthly payment as a percentage of the loan balance. Installment credit contracts are also much less flexible to any loan modifications, meaning that the buyer has to be more disciplined in paying back the loan.
In determining your credit score, the credit bureaus include both types of credit. And while automotive lenders will look at your entire credit history they put a special emphasis on your installment car credit history. In other words, while a good payment history with a credit card will help your credit score, it's not the strongest type of credit to bring to the table if you're applying for a car loan.
For this reason, many applicants with decent credit scores can still be turned down for a car loan if they've never had a car loan before or if it turns out that that one of their previous car loans had a spotty payment history. In both of these cases, the applicants might have to prove themselves to a regular lender by first establishing themselves with another lender – and in most cases, that lender will have to be a bad credit lender that caters to a lower credit tier of customers.
How to apply for a bad credit auto loan
At Auto Credit Express, we specialize in placing customers with bad credit with dealers that can help get them financed. These affiliate dealers are knowledgeable and work with a broad spectrum of lenders to ensure you have your best chance at getting approved for car loans with bad credit.
So if you are serious about getting your car credit back on track, you can begin a new chapter in your life by filling out our bad credit car loan application now.