If you have less than perfect credit and have been wanting to purchase a new or used car, this may be the ideal time to start shopping! According to an Experian Automotive report, the sales of new and used cars to customers getting subprime loans has increased.
Subprime loans to customers purchasing new cars increased during Q3. This puts these loans at 25% of loans for all new cars. Used car loans at subprime rates are on the rise, becoming over 54% of the loans made for used cars.
As the economy continues to change, consumers are becoming more willing to make large purchases. Lenders are willing to take on a little more risk by approving more subprime loans. The affect of all this is that the new and used car market is open to more consumers.
While the market is far off from where it was a few years ago, changes in lending trends are helping to get more people into new and used cars. The credit scores required for new and used car purchases are lower than this same time last year. There is also an increase in the amount of money approved for both new and used car loans.
Some of these increases are due to changes in spending habits. Late car loan payments and repossessions have both gone down. The goal of lenders is to move auto inventory and to do that they need customers. When there are reasons for lenders to be more positive about the market, they will extend the subprime loans to more people, generating more sales.
The availability of new and used cars to consumers with subprime credit is still influenced by the brand and model. For example, Lexus and Lincoln require a higher credit score to get you into a new car versus a Dodge or Chrysler product, which only require the lowest scores.
With a little research on brands and subprime lenders, this could be the time for you to show your consumer confidence by purchasing a new or used car.
If you have bad credit due to unemployment, illness or any other type of dramatic life change, you're probably thinking that you're out of luck when it comes to buying a used car. However, that is simply not the case. According to a recent report from Experian Automotive, more auto lenders are taking the plunge on offering loans to customers in the subprime risk tier, with those loans representing more than one in four new vehicle loans for the second quarter of 2012. Given these circumstances, now is perhaps the right time to look for an auto loan that not only fits your needs, but also your budget.
You Have Options
The last thing you should do is let a less-than-perfect credit history in the way of your chances of buying a solid vehicle. Keep in mind that while you might not be able to get the newest vehicle on the showroom floor for 0.9-percent APR, there are plenty of excellent options for you to utilize in order to get yourself behind the wheel of a decent vehicle.
- Work with the Loan Specialist. Depending on who you talk to, the loan specialist may be able to work with you on a case-by-case basis, especially if you've been making efforts towards restoring your credit history.
- Go With a Cosigner. Having your loan backed by a cosigner with an excellent credit history and stable income can increase your chances of obtaining a reasonable car loan.
- Save Your Money. The more money you are able to put down as a down payment, the smaller your overall monthly payments become.
- Buy Smart and Sensible. It may be easier to obtain a loan for an affordable compact or midsize sedan rather than something that is a bit more extravagant.
Being turned down for an auto loan due to having no established credit history, leaves one shaking his head. How in the world does anyone get that first loan if no lender is willing to take a chance? In many cases, a potential borrower with poor credit has a better chance at securing auto financing than the person with no credit. It doesn’t seem to make any sense. What is the key to unlocking the credit mystery and getting approved for a car loan? Buy here, pay here car loans seem to have been designed to provide a solution for the first-time car buyer.
Buy here, pay here car loans is just another way of saying “in-house financing”. It simply means that the auto dealer is also willing to finance the car loan eliminating a third party lender. Because the seller is absorbing the risk, he can take a chance on customers with bad credit history of none at all. The term “buy here pay here” was coined due to the terms of the loan. Traditionally, this type of financing required that weekly or bi-weekly payments be made in person to the dealer.
The interest rate will usually be higher than the low rates offered by third party lenders. Of course, that is quite irrelevant when third party lenders won’t extend credit to the first-time buyer anyway. The upside is the opportunity for the first-time borrower to purchase much needed transportation and build credit at the same time.
There is another advantage to shopping at car dealers who do their own financing. The cars they sell must be affordable, so they aren’t squeamish about giving satisfactory value for the trade-ins they have a ready market for. It is easy to start in a low value, inexpensive car and once a payment history is established that auto can be traded in on a better one.
Bankruptcy can be a scary thing if you're not familiar with it. Here is an overview of what bankruptcy is, how it works, and what you can expect if you file for bankruptcy.
What is bankruptcy?
When someone files for bankruptcy, they are declaring their inability to repay their debts. Individuals can declare bankruptcy, but so can municipalities and businesses. Individuals can file either Chapter 7 or Chapter 13. Chapter 7 is also known as straight bankruptcy. In this situation virtually all possessions are surrendered to be liquidated (sold off). The money from the sale of these goods is then turned over to the creditors to pay their debts. By comparison, in Chapter 13 the debtor is allowed to keep their belongings, but is required to present a plan as to how they will pay off their debts. In this instance part of the debts might be forgiven, but the balance is expected to be paid off.
What types of debt are not discharged?
Although both Chapter 7 and Chapter 13 will forgive most debts, are there certain types of debt you will still be expected to pay. Among debts not discharged are student loans, child support, some types of taxes, fines, as well as any interest incurred on these types of debt. If you are thinking about filing bankruptcy, its important that you speak with a lawyer to determine which of your debts will be discharged, and to discuss what will happen to the non-discharged debts.
How will bankruptcy affect my credit?
Fewer events in your life will have a greater negative impact on your credit than a bankruptcy. In the first year following the bankruptcy, you may find it extremely difficult or impossible to obtain a loan or credit from anyone. The interest rate on larger purchases, such as a car loan, will likely be extremely high. The good news is, as you get further away from the bankruptcy in terms of time, it will have less of an impact on your credit report. It's important that you stay current on any payments for non-discharged debt. By doing so, you can begin to rebuild your credit.
If you've just come out of a bankruptcy, it might feel a little bit like you're attempting to put the pieces of your life back together. The good news is it is definitely possible to recover from bankruptcy, although it can take some time to do so. The first year following the bankruptcy is when it will have to most impact on your credit score. During this time it may be very difficult to obtain financing for larger purchases, such as a car loan. It's usually a good idea to put major purchases on hold until the worst passes. In the mean time, here are some steps you can take to proactively rebuild your credit.
Be diligent about paying off debt not covered by the bankruptcy.
There are certain types of debt that you will still be expected to pay, even if you file for bankruptcy. Back taxes to the IRS, for example. If you have any outstanding debt after filing for bankruptcy, put together a plan to get it paid off as soon as possible. Make sure that you make the payments on time or early each month. If possible, you might also think about setting up an automatic payment system.
Get a secured credit card.
A secured credit card is one which is backed by personal savings account. The limit on the card will be equivalent to the amount in the savings account, because if the card used defaults on a payment the card issuer will pull the money from the account. If you decide to get a secured card, make sure you have a conversation with the issuer about how payments are reported to the credit bureaus. Not all secured card issuers report payments to the credit bureaus, so you want to make sure that the one you choose will do so, as that is the reason you are getting the card in the first place.
Take out a small personal loan.
Any loan that you are able to acquire following a bankruptcy will likely have a very high interest rate attached to it. But a smaller personal loan would still allow you to have affordable payments. If you use the loan money to purchase a CD, you can also make money off the interest on the CD.
Rebuilding credit takes time, but it can be done. Be diligent about paying your bills and you'll take some great strides in making this happenn.