(1) If you’re securing an auto loan for bad credit with a high APR, what is one of the items you should exclude from your financing?

(a) Don’t include any additional insurance in your payment amount.

(b) It’s best not to add the costs of any type of extended warranty into the amount of your loan.

(c) You should always include the costs associated with an extended warranty or additional insurance in your payments regardless of the APR.

(d) Both a and b

Answer: (d) Both a and b. Since you already carry auto insurance, you should refrain from including any additional insurance in your loan amount as well as the costs associated with an extended warranty. Wait until you can refinance the vehicle at a lower amount to add these types of amenities.

(2) What items will lower your credit score when applyng for a bad credit auto loan financing?

(a) Making applications for credit will reduce your score.

(b) Attaining your credit score before you walk into the dealer.

(c) Obtaining your credit report online.

(d) None of the above.

Answer: (a) Anytime you try to apply for credit, an inquiry is made that will lower your credit score. Simply obtaining your credit report will not affect your score.

(3) With regards to obtaining an auto loan for people with bad credit, what is the “car enhanced score?”

(a) A car enhanced score is a score that is either higher or lower than your regular credit score and is based on your credit worthiness when applying for an auto loan with bad credit.

(b) This score is the score used to measure your payment habits on your credit report.

(c) If your credit score is high, it’s referred to as a “car enhanced” score.

(d) The car enhanced score is a statistical formula used to assign a value to the number of applications you’ve made to obtain a bad credit auto loan refinance.

Answer: (a) The car enhanced score is a variation of the credit score that lenders use when you apply for a bad credit auto refinancing loan.

(4) What main criteria do lenders use in appproving you for an auto bad credit loan with regards to your credit report?

(a) They review the amount of open accounts you have and your length of employment.

(b) They consider your payment habits and the number of loan and credit accounts your hold.

(c) They determine your credit worthiness based on the number of financial transactions you have on your report and how long you’ve been at your residence.

(d) None of the above.

Answer: (b) With regards to your credit report, the key criteria lenders consider in the approval process for a bad credit auto loan financing are the number of open accounts you have and your history with respect to paying them on a timely basis or paying them off.

(5) Which of the following can be used as a down payment when obtaining a bad credit auto loan refinance?

(a) Cash

(b) A manufacturer’s rebate

(c) Trade Equity

(d) Both (a) and (c)

Answer: (d) Although you may still have to secure cash in addition to the trade-in value of your car, they can both be considered a down payment on the purchase price. A manufacturer’s rebate can be used to reduce the sales price of a vehicle but it is not considered to be a down payment when applying for an auto loan for people with bad credit. Therefore, if you’re trying to secure a bad credit auto loan and need a down payment to attain a loan, a manufacturer’s rebate will not count in this regard.

Hopefully, you’ve been able to garner a bit more understanding from answering the above questions. Look online and research the various lenders who provide bad credit auto loans and see how much more you can find out with respect to buying a vehicle for your current needs.

(1) When applying for auto bad credit loan, if you need to remove disputed items on your credit report, you might have to wait at least 6 weeks before you can apply for an auto loan for bad credit.

Answer: False. Normally, it takes about 60 days to remove disputed items on your credit report.

(2) If you’ve just moved, a lender will still look favorably on your application for an auto loan for people with bad credit.

Answer: False. If you’ve moved in the last six months, lenders will not consider this to be a favorable item in considering you for an auto loan with bad credit. Lenders do not like people who move around. They like people who are stable and continue to prevail in their circumstances.

(3) You’re usually considered a sub-prime borrower at any credit score below 500.

False. Generally, if you’re score falls below 500, you’re not considered any type of borrower even for a bad credit auto loan refinance. Sub-prime borrowers have credit scores that range from 550 to 680.

(4) If you want to be considered for a bad credit auto refinancing loan you should make sure you’re not trading a car you still owe money on, that disputed items are removed from your credit report and that your debt to income ratio and credit balances are low.

Answer: True. Lenders like to see this kind of stuff.

(5) If you’re a recent college graduate and have yet to obtain a job, you can still qualify for an auto bad credit loan.

Answer: False. If you’ve just graduated from college, you shouldn’t consider applying for an auto loan for bad credit until you’ve been on the job for at least six months.

(6) It usually helps to show that you’re paying on a mortgage or that you’ve had a past refinance when applying for bad credit auto loan financing.

Answer: True. Mortgage loans and refinances show a degree of stability and that the consumer has been and is making regular payments to pay off a debt.

(7) With regards to obtaining an auto loan for peole with bad credit, if you do not have a credit history, you should be on the job at least one year with the same employer.

Answer: True. This is the minimum requirement.

(8) If you have a credit history, you should be on the job at least 6 months with the same employer to qualify for an auto loan with bad credit.

Answer: False. You should be permanently employed for at least two years to be considered for a bad credit auto loan refinance.

(9) When being considered for bad credit auto refinancing loan, you should not have had a repossession in the last 2 years unless it was included in a bankruptcy.

Answer: False. Normally you’ll be considered for a bad credit auto loan if the repossession occurred within the last year outside a bankruptcy.

(10) If you’re a sub-prime borrower and you have a co-signer, the lender can use the co-signer’s income in order to approve a bad credit auto loan.

Answer: False. Your loan will still be based on your income even if you have retained a co-signer to pledge to pay the loan amount.

How did you do? You can still obtain an auto loan with bad credit. It just takes knowing what steps to take and you’ll be in a new car in a small amount of time.

photo credit: shelms

(1) What is an auto bad credit loan?

An auto bad credit loan is designed for people with bad credit, typically those individuals who have a credit score below 680 so they can obtain reliable transportation.

(2) Can you still qualify for an auto loan for bad credit if you’re self-employed?

Yes. You can still qualify for bad credit auto loan financing if you’re self-employed although your income is harder to prove. Therefore, when being considered for this type of loan, make sure you provide tax returns for the past two years that have been completed by a tax professional.

(3) What documentation do you need when you apply for an auto loan for people with bad credit?

For income verification, you will need a pay stub from your employer. Other documentation includes a telephone or utility bill to verify your address and phone number and your most recent bank and credit card statements from the last 30 days. In addition, about four references are required and, if you don’t own a home, a phone number for your landlord to verify that you’re up-to-date on your rent.

(4) I’ve heard that obtaining a loan through a “buy here, pay here” dealer is an option for people with bad credit. Is this a good way to secure an auto loan with bad credit?

A “buy here, pay here” dealer type of loan is where the sub-prime borrower obtains his loan through the same dealership he purchases his car. No credit history is required which may lead you to believe this is a good loan to obtain if you have a damaged credit score. However, attaining a bad credit auto loan refinance  over the Internet is, in most instances, a better choice . Your payments for a dealer financed loan are not recorded on your credit report where payments are documented if you don’t obtain dealer financing. Therefore, a bad credit auto refinancing loan not obtained through a dealer gives you the opportunity to prove, by making your monthly payments, that you can qualify for a lower-interest loan at a later date.

(5) How are my monthly payments determined for an auto loan for bad credit?

Your monthly payments are based on your credit profile and the sales amount of the automobile you choose to purchase.

(6) How can I qualify for extended terms if I want to lower the amount I spend each month even more?

Usually, if you purchase a newer, lower-mileage vehicle, you’ll be able to qualify for an extended term on your bad credit auto loan financing amount.

(7) If a down payment is required, how much should you put down in order to assure you’ll be approved for an auto loan for people with bad credit?

If you can put down 20% of the sales price, you’re pretty much guaranteed that you’ll secure an auto loan with bad credit.

(8) What are some steps you can take in order to get a better APR on a bad credit auto loan refinance?

If you can repair your credit before applying for the loan, this can be most helpful. Paying off some large debt credit cards can raise your credit score by as much as 200 points. Therefore, lowering your debt and making timely payments six months before applying to obtain a car loan can assist you in getting a better deal. Also, know your credit score before making application. Be well-prepared to handle any questions a lender may have about the negative items on your report. If you can lower your score, maintain a habit of paying on time and reduce some of your debt load, you’ll have the leverage to succeed in obtaining a bad credit auto refinancing loan.

(9) What type of auto is the preferred type of vehicle to finance when it comes to a bad credit auto loan?

Typically, if you select a newer model car (1 or 2 years old) with less than 50,000 miles, you will have a vehilce that most bad credit auto lenders prefer to finance.

There’s a lot of opportunity on the Internet to finance your vehicle even if you now suffer from a low credit score. Check out your options. There’s a lender out there who is willing to work with you.
photo credit: dno1967

How to Qualify for an Auto Loan for Bad Credit

The most important factors in qualifying for this type of loan are: proof of employment, be over the age of 18, be a US Citizen (not always required), and have a minimum monthly income – generally around $1500 per month. It will also benefit you if you have lived at the same address for more than 3 years. You will be asked to prove your income with paystubs and possibly tax documents. You may also be required to show proof of residency – usually utility bills.

Your credit score will be checked, but will probably not exclude you from receiving the loan as long as you meet the criteria above. The credit score will be a factor however in determining your interest rate. The lower the score, the higher the interest you will be likely to pay.

What May Keep you From an Auto Loan for Bad Credit

If you are a temporary worker or a seasonal worker, you may not be able to qualify since you cannot prove stable employment. If you have had a recent repossession that was not part of a bankruptcy, that will also likely exclude you from qualifying. If you are under 18 you will not be able to obtain a loan without a co-signer. If this is the case for you, consider asking your parents or guardian to act as a co-signer for you. Lenders generally will not loan on cars older than 7 years, so keep that in mind when shopping for your car.

Where to find Auto Loans for People with Bad Credit

Depending on your credit and your relationship with your bank, you may be able to be pre-qualified for an auto loan at your banking institution. Talk with your local banker to find out what kinds of programs they offer. Another option is to look at Credit Unions to see if you can pre-qualify with them.  If these two methods do not work, work with the car dealership. Generally they have special relationships with numerous financial institutions and they have a vested interest in helping you find a loan – if they can’t help you, you won’t buy from them. Be careful about “Buy Here/Pay Here” car lots however, those loans may not be serviced by the more reputable financial institutions and you will likely pay far more in interest than you need to.

Summary

If you have less than perfect credit, consider a bad credit auto loan. Although the interest rates may be a bit higher, it can get you into reliable transportation. Remember that you have to have a stable job, be over 18 and be a US Citizen. Also, be sure to shop for a car that is less than 7 years old in order to qualify for most loans. Banks and Credit Unions are a good place to start when looking for auto loans for bad credit, followed by a reputable car dealership.

With this information you should be able to start your search for a bad credit auto loan and find the right program that will fit your needs and your budget.

photo credit: Caveman 92223 — On the Long Road Home