Tips on what consumers with questionable credit can do for their best chances at successfully completing a high risk auto loan
Here at Auto Credit Express we know that people who have experienced past problem credit need to make the right choices – some of which may be difficult – in order to successfully reestablish their car credit. But in most instances making the right choices can mean the difference between successfully completing a loan and further damaging someone’s credit.
We base our opinions on more than twenty years of experience helping car shoppers with bad credit that are searching for online car loans find those dealerships that can offer them their best chances for car loan approvals.
Car loan concerns
In some cases the applicants who contact us have experienced issues with previous auto loans that include everything from signing a contract they didn’t understand to picking out a vehicle that they’d finally come to realize they couldn’t afford.
What we’ve come to learn from thousands of buyer experiences is that by understanding the process and following some simple guidelines, many of these borrowers could’ve avoided the situations they eventually found themselves in.
Doing things the right way begins even before an application is submitted. We’re talking about the fact that credit-challenged buyers should know what’s contained in their credit reports (consumers are entitled to one per year from each of the three credit bureaus at no charge) and at least one of their credit scores (these can be purchased or obtained a no charge from sites like Credit Karma).
Most consumers with established credit and FICO scores over 660 should qualify for a conventional car loan at close to near prime interest rates with a captive finance company, bank or credit union.
Consumers with scores that fall below the 660 threshold will typically be looking at either a subprime auto loan or, in some cases with really bad credit, a loan through a BHPH car dealer (an option we won’t cover now).
Car shoppers need to know their credit scores and the information contained in their credit reports is important for a couple of reasons:
• The conventional and subprime auto loan processes are different so they’ll know what to be prepared for
• Applying for a conventional car loan with low credit scores usually result in a credit denial – wasting the borrower’s, the lender’s and the car dealer’s time (if it was done at a dealership that lacked a special finance department)
The next step is determining a vehicle budget. In addition to the car payment, you’ll the cost of gas as well as full coverage car insurance needs to be taken into account. By comparing this figure to the income remaining after expenses (by using the loan calculators on sites such as ours) borrowers can determine their debt to income (DTI) and payment to income (PTI) ratios. All banks use these ratios but it’s especially important to lenders who extend credit to higher-risk borrowers.
Next, car shoppers should research those vehicles on the lower end of the price range they budget for by visiting web sites such as consumerreports.org. This will show which of these cars are the most dependable – thus saving money on operating expenses.
Backend product concerns
Backend products are those offered by dealership finance departments. Of these, gap insurance can make sense for loan terms over 48 months and/or with less than a 20 percent down payment.
A reasonably-priced auto service contract also can be justified when buying a used car or when financing a new vehicle beyond its warranty period. It’s also a good idea to shop the cost of a service contract beforehand to be sure the dealer’s price is fair.
On the other hand, buyers should stay away from window etching, rust-proofing and paint protection. All three add little or no value. If necessary you can etch windows and seal the paint yourself for a fraction of the cost, while most vehicles now come with a seven to ten year rust perforation warranty from the manufacturer.
As for the dealers themselves, check with friends, co-workers and the Better Business Bureau before visiting one to determine its reputation for fairness in treating customers. The biggest concern for consumers with less than perfect credit is that they may have a hard time finding a car dealer willing to help them.
Before submitting a loan application, car buyers should know their credit scores and the information in their credit reports. If their credit is a problem they should also check their income and expenses to be sure they meet basic requirements of a subprime car loan.
How we can help you with your concerns
Finally, most car shoppers with credit challenges have more options than they realize. Before checking out a tote the note dealer, they should visit us here at Auto Credit Express where we match people that have experienced difficulties with their auto credit with new car dealers that can offer them their best chances for approved car loans.
So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.