For consumers with questionable credit the higher risk auto loans offered by some franchised new car dealers can help reestablish their your car credit
Car buyers that have experienced credit difficulties sometimes want to know how to buy a car with bad credit and no money down – in other words they are looking for a car loan with no money out of pocket.
Here at Auto Credit Express we’re familiar with these situations because for over two decades we’ve been helping buyers with poor credit looking for online auto loans find those new car dealers that can offer them their best opportunities for auto loan approvals.
And while there are financing options that will allow them to drive a new or low-mileage used car while repairing their damaged credit at the same time, every one of these lenders will require some type of owner equity in order to qualify for a loan, despite what some of the articles on the internet might lead you to believe.
Consumers are constantly bombarded with stories – many containing creative grammar and spelling – that describe how they can buy a car even if their credit is, shall we say, less than perfect. The fact is that there are lenders out there who are willing to take a chance on car buyers with low FICO scores – particularly those individuals who at some point in time may have had better credit.
The chances of this happening are especially good if one or two life events (such as a job loss or medical problem) can be identified that might’ve led to their current credit difficulties.
But before taking the plunge there are a number of things that should be considered:
• The first car loan following a drop in credit scores will be at a higher (sometimes much higher) interest rate than many consumers are accustomed to.
• The bad credit and no money down car loan is a myth. Most lenders require a minimum of $1,000 or 10 percent down, whichever is less.
• Provided payments are made on time (while maintaining all other obligations), most buyers will qualify for a better interest rate for their next loan.
• As with any car loan, negative equity makes it difficult to refinance or trade in a vehicle until the loan is half to two-thirds completed (i.e. 30 to 40 months for a 60 month loan).
• Failure to make timely loan payments will result in credit scores dropping even further.
Since re-establishing car credit is the priority, we suggest following these tips:
• Choose an inexpensive small to midsize new or used car
• If possible, opt for a loan term that’s 48 months or less
• For used cars, get a vehicle history report, compare the insurance rates on each vehicle and, if the history report is clean, have the vehicle you plan on buying physically inspected by a certified master mechanic as well as a body and frame specialist
Why go to all this trouble?
By financing an affordable vehicle for 36 to 48 months you’ll save money and should be able to trade out of it in 18 to 30 months and into another loan at a lower interest rate. With a more expensive vehicle the longer loan term means that even when your credit scores improve, it will be difficult to trade in or refinance it because of a longer negative equity period.
Secondly, having it thoroughly inspected means you won’t be buying a vehicle with hidden damage that could cost you thousands of dollars in repair bills while in addition to being worth less at trade in time.
The Bottom Line
Higher-risk auto loans are a good thing if they’re done right even if you can’t buy a car with problem credit and no money down.
Another thing you should know: Auto Credit Express matches people that have experienced car credit difficulties with those new car dealers that can offer them their best chances for approved auto loans.
So if you find yourself in this situation and you’re ready to reestablish your auto credit, you can begin now by filling out our online auto loan application.
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