How to Get a Car Loan Despite Bad Credit

If you were wondering how you can repair your credit at the same time complete a subprime auto loan then you just tuned in to the right place because this article is going to show you how.

Before anything else, you should first be very familiar with what your credit report and your score says. A FICO score above 660 is what you need to get a car loan with a financial institution like a bank or a credit union. If your FICO score falls below 660, then it just means you need to find a subprime lender to get the loan you need to purchase a car. Conventional loans and high-risk (subprime) loans are very different from each other, however for both cases, knowing where your credit score stands is very significant to get your loan approved.

Next you should know your car budget. Aside from the amount you will be paying for the car, you should also anticipate the other fees you will be paying for once you get a car like your gas and car insurance. Check if your income can accommodate these fees and if you think you need help in budgeting then you can log in to autocreditexpress.com for assistance.

Next, you should maximize your options and research about the kinds of cars you can buy given your current budget. If you want to look online visit consumerreports.org; this website is very helpful in illustrating the models that are fit for your lifestyle and money.

Before you go to a dealer you should first come to friends and your other relatives and most especially the Better Business Bureau for advice. Buyers with bad credit may find it hard to look for car dealers that will be very willing to help them in owning a new car that is why you should solicit advice and check the website of consumer protection agencies first.

Refinancing an Auto Loan

Mortgages are not the only types of loans which can be refinanced, but also auto loans. Unfortunately, the majority of the public are not aware of it. The survey, conducted by CarFinance.com, emphasizes that refinancing an auto loan is feasible and may be worth anyone’s time.

The survey by CarFinance.com had 2,000 adult respondents in the months of June and July 2012, and discovered that 63 percent of the respondents are not aware that they could refinance an auto loan. Moreover, 12 percent of the respondents said they had previously refinanced an auto loan.

While it is still a bit difficult to get credit, at present, it is less difficult to get a loan than in the previous year. The following is a guide to assess whether or not you should refinance an auto loan.

First, if an auto loan comes with rigid pre-payment penalties, then it’s not a good time to refinance, especially if you have a small balance and you are not capable of making large monthly payments.

Second, make sure to assess your credit by getting your free annual report from the three credit reporting agencies – Equifax, Experian, and TransUnion – through visiting AnnualCreditReport.com. Check if the information are accurate, and if there are errors, dispute it.

In addition to getting your credit report, getting your credit score is also important. If you have a good credit report and credit score, then you will more likely benefit from refinancing.

Third, look for a number of auto loans from different banks. It is better if you have a lot of options or a wide range of quotes. Websites such as LendingTree.com allows you to file an application to many lenders all at once.

Fourth, do not rely on the figures given solely by the bank, but you should also use an auto loan calculator to compare your existing payment schedule with your recent one. On a positive note, refinancing an auto loans does not include expensive application fees or closing costs, unlike refinancing a mortgage.

What is a Car Title Loan?

When you need to borrow money for a car and you are currently insolvent, then title loans is a good tool for that. Mortgage for an automobile could cost you $175 to $2,500 and the terms of payment would be within 30 days maximum, this is according to some State laws. However, this may not be the case all the time because in some states the loans could rage up to 30% in a month. This would cost a customer a 360% of annual percentage rate, and most of the time, lenders to these loans are granted the additional origination fees.

These lenders are often in service out in storefront destinations and they also accept check cashing and pawned items.

If you have no clue what a title loan is, then here is an example: you sign a document that binds you to a state law with interest that you have to pay within 30 days. You taking this title loan of $500 mean you are relinquishing your car title for collateral. If you fail to pay the collateral then your car will be repossessed. Aside from this car title loan you are going to give, you also have to pay the company a $15 origination fee. The typical rate for the interest is at 30% that is about 150% total interest.

Usually, these kinds of loans do not allow partial payments, so if you cannot pay it in full the lender may permit you to pay off within another 30 days but you must pay additional interest charges.  This however is only allowed four times in some states.

So, how much does a loan cost? First, you have to pay a $15 origination fee and a $450 interest that is computed by the monthly interest rate in this case, $150 and the number of months you have to pay it 3 months. So the total cost will be $465 in an interest to get a hold of $500.

It will be wise to think very well whenever you have to engage in a car title loan. Not only are the interests and the fees high, but your car is also in a great risk.

Subprime Auto Lending Growing Once Again

Subprime lending is becoming popular once again, even though lenders are still staying away from subprime mortgages, which is the one of the triggers of the nation’s housing breakdown.

There has been an increase in subprime credit cards and auto loans and a few bank risk managers expect increases in the existing $600 billion US auto loan market.

Based on a recent survey of risk managers at banks and other financial institutions published in the previous week, although only 25 percent of risk managers expect a 25 percent increase in the subprime lending during the next six months, one half of those who expect an increase believe that it would fall on auto loans.

FICO, the credit analytics firm, together with Professional Risk Managers’ International Association, conducts a survey of risk managers every three months regarding their prospects for the coming six months. However, this was the first time the subprime lending was included in the questions.

In general, subprime loans are intended for borrowers with credit scores less than 680. Based on the data of Experian, 44 percent of all US auto loans in quarter one were given to borrowers with scores less than 680, which is an increase from 42 percent in the previous year.

Subprime auto loans that were packaged and sold to investors in the secondary market did favorably. Even though subprime loans are smaller than mortgages, cars are frequently considered as important to households. In fact, Andrew Jennings, chief analytics officer at Fair Isaac Corp., said that the public is struggling to pay back their auto loans more than they do in paying back their mortgages.

The increase in the subprime auto lending has been a surprise to Guy Cecala, publisher of Inside Mortgage Finance. Cecala believes that it was brought about by securitization. People have higher security about subprime auto loans compared to subprime mortgages.

Borrowers With Poor Scores Get Auto Loans

For the first quarter of the year, Experian Automotive released a report about the status of automotive financing. This is good news especially for those who want to buy a new car.

According to the report, more buyers with lower scores are getting approved for auto loans. In financing a new car, the average credit score decreased six points to 760. In contrast, in financing a used car, average credit score decreased four points to 659.

Moreover, more loans are being offered by lenders. Loans to car buyers with nonprime to deep subprime credit score were up by 11.4 percent.

In addition, buyers are taking on loans of larger amounts. For a new car, average loan amount increased to $25,995, more or less $589 more than last year. However, for a used car, the average loan amount increased by $411 to $17,050.

Finally, lower monthly payments are being offered by lenders. According to Melinda Zabritski, director of automotive credit at Experian Automotive, monthly payments can be less expensive due to longer loan terms and lower interest rates. Average interest rate for new cars is 4.56 percent and 9.02 percent for used cars.

Experts said that all these good news were because there has been an increase in consumers paying back their loans. The reports adds that the number of loan payments that were overdue for 30 days declined by 7.6 percent and those that were overdue for 60 days declined by 12.1 percent. Also, there was a decline in vehicle repossession by 37.1 percent.

Zabritski added that lenders are able to offer more loans and charge lower interest rates because there are lower losses. However, more loans and lower interest rates will not guarantee borrowers approval for auto loans.

Whether you want a brand new car or a used one, experts advise taking into consideration the reliability of the car, the cost of financing and your ability to repay the loan.