Bad Credit Auto Loans- Tips and Scams to Avoid
- Advice for people who need a bad credit auto loan
- How to increase your chances of loan approval
- How to get your credit report with score & clean up your report
- Where to get a bad credit car loan
If you have bad credit the best thing to do is wait to buy a car until you get your finances cleaned up. Sometimes you can't wait so we are going to give you the information you need to get the best deal possible in your situation.
Why Buyers with Bad Credit get Raked Over the Coals
- Some lenders will only approve you if you've had a prior auto loan
- Lack of information about financing options and your credit history
- Limited options makes you vulnerable to dealer tricks
- Too much focus on monthly payment instead of price
What to Expect from the Dealer When You Have Bad Credit
- Extremely high interest rates
- Lies about the lender "requiring you" to buy an extended warranty, credit life insurance, etc.
- Lies about your credit report and score
- Thinking you are desperate they are more likely to use common scams
Tips for People With Bad Credit
- Watch out for 72 or 84 month loans - you will pay too much interest
- Get your credit report and score so the dealer can't lie to you
- Use a bad credit lender like Auto Credit Express with a solid reputation
- Don't focus on a specific vehicle - you're choices may be limited
If You Fail to Prepare, Prepare to Fail
All buyers need to know the current state of your credit history (good or bad) good or before you visit any car dealers so you know the interest rate you should be paying. If you have bad credit, you'll never ever get the 0% financing that you see in ads. Applying for financing without knowing your credit score is the biggest mistake a car buyer can make. Click here to use our loan payment calculator tools to play on even ground with car dealers and verify their numbers to make sure they are not payment packing your loan.
Help Finding Bad Credit Auto Loans
If your Credit Score is < 600 or you don't have a past history of auto loans, don't submit loan applications that get rejected, dropping your score even further. Apply to Auto Credit Express, they work with multiple lenders. They may be able to get you car financing from one of their high risk lenders, with decent online rates, even with a bankruptcy. If your score is > 550, $1,500 or more in monthly income, full time employment, Auto Credit Express should be able to help you.
Avoid Financing Options and Extras into High APR Loans
Many people with bad credit make this mistake. If you know you are paying 18% APR, then forget about adding items like warranties and insurance into your loan. Why pay the high interest on those too? That just digs you a deeper hole. You can buy those things after the fact directly without the car dealer markups and high APR.
How to Get Bad Credit Auto Loans
You can improve your chances of getting approved tremendously by raising your credit score. Unless you absolutely must by a car right now, take some time and try to pay down your balances as much as possible and try to get your score above 600. You may still be considered to have bad credit but will be much more likely to get approved. Once you have improved your situation save up some money to put at least 20% down on the car so you won't be upside down. If you are, it sets you up for a common dealer scam in the future where they offer to pay off your current loan so that you can upgrade. The trick is that all they do is put your old loan amount into your next car's monthly payment and you end up paying for two cars but you only own one.
- Get your Credit Score from Experian so dealers can't lie to you about your score.
- If you have old unused credit accounts, close them. They drag down your credit score.
- Remove erroneous previous addresses and other errors off your credit report
- You should have greater than $1,500 monthly income, stable at least 6 months
- Pay down your credit card balances as low as possible
- Pay higher APR cards first before applying for auto loans
Getting Your Credit Report Online
You can run your own credit report as often as you like without affecting your score. It's crucial for you to know your score so the dealer cannot lie to you. Forget about the free annual credit reports, because what you really need is the report with the score option, which you have to pay for. No web site gives your score for free. You need to get the 3 bureau report with the 3 score option, because that is what the lenders are looking at.
Experian Online Credit Report - You get a thorough credit report in 30 seconds from one of the big 3 credit bureaus. If you have never seen your report before, you should get the "Merged Credit Report" from All 3 credit bureaus. Experian also offers Triple Advantage, the complete credit monitoring solution. This package includes unlimited credit scores and monitoring from all three credit bureaus.
Equifax Online Credit Reports - Equifax is one of the big 3 credit bureaus in the U.S. The Score Power package includes your Equifax Credit Profile, your FICO score (also known as your BEACON score), plus a personalized analysis with tips on how to improve your score over time & how you rank among other consumers.
TrueCredit - TrueCredit has your credit report online instantly. Get the 3-in-1 Credit Report With Free Credit Score if you have never seen your credit report. It has your credit files from the top 3 credit bureaus used by car dealers. Now you'll have the story on what car dealers know.
Use Caution When Trading in a Car with a Loan Balance
We hear from our readers all the time who traded in a car they owed money on and a couple of months later were shocked to hear the dealer did not pay off their car loan in ten days as promised. With this scam, when the bank calls, you are responsible because the old car loan is in your name, and the dealer didn't pay it off. If you trade in your car that you owe money on, make the dealer put in writing that they'll pay off your car loan in ten days, or no deal.
Watch Out for These Scams
Straw Purchase Loan - When You Have a Co-signer!
With car buying, a straw purchase is when the dealer tells you that with your bad credit, you can't qualify for the auto loan so you need a co-signer. The co-singer is duped by the dealer and the loan ends up in their name! This will not help restore your credit. To Avoid The Scam, have both signers at the dealership so both signatures will be done together.
Financing Fell Through
In this scam the dealer will call you several days after the deal is done and tell you that the financing fell through and you will need to pay a higher interest rate. Avoid this scam by not financing through the dealership whenever possible.