Why the bad credit car loan process is different

When customers apply for a bad credit car loan, one of the first things that they notice is the way the dealer handles the process of finding a vehicle. Instead of picking out a car, the special finance manager will first wait to hear back from the bank and then show you the cars that fit the program.

Auto Credit Express and bad credit car loans

One of the questions that we get at Auto Credit Express comes from customers who have gotten a regular car loan in the past and don’t understand the special finance process. In this article, we will explain how the process works.

The bank determines your car budget

Guidelines for a bad credit special finance car loan are much stricter than for a regular car loan. In part, this is due to the fact that customers with bad credit are usually a higher risk for banks than customers with good credit. When you submit a credit application, the bank looks very closely at your income and expenses. In fact, the bank requires you to prove your income with pay stubs that show year to date income. You may also be required to prove job tenure with a W-2 from a prior tax year.

Additional income such as child support or disability needs to be verified with court documents, determination letters and bank statements.

Once the bank determines your income, it uses the information on the credit application, as well as estimates for other bills, to compute your monthly debts. The lender factors in such things as utility payments and car insurance and comes up with a payment that it believes you can afford.

The approval process explained

If you are approved, the bank will then place you in one of their programs based on your credit score and credit history. The particular program that you qualify for will dictate the interest rate, contract term and down payment requirements. This information will then be sent to the dealer in the form of a payment call.

The inventory selection process

Once the special finance department receives the loan information, the finance manager will determine which cars in their inventory fit the approval requirements. With most banks, the newer the car and the lower the mileage the longer the loan term allowed.

Understanding the complete process

Most customers that have not financed a car with a subprime lender choose a car based on what they like – color, model or type. It could be a 5 year old pickup with 70,000 miles on the odometer. Even though this vehicle is clean and drives nicely, the interest will be higher due to its age, and a service contract (which you’ll want, especially for a pickup) will also be more expensive. In addition, the term may also be shorter due to the mileage. In other words, it may look nice, but it also may not fit the payment call.

The Bottom Line to reestablishing your credit

By understanding the buying process, you avoid being disappointed by looking at the wrong kind of car. Remember, the object is to reestablish your car credit, not to get you your dream car. To better understand the process and for more answers, go to www.autocreditexpress.com. Our website has calculators to help you determine your budget as well as a loan resource center that can help with your questions. If you need additional assistance, our toll free number is listed at the bottom of every page. Here at Auto Credit Express, we are here to help you get back “on the road” to better credit.

Posted on June 26, 2008 by in Used Cars
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