Pierre Money Mart Blog

Most people need to take out an auto loan when they want to purchase a new or used car. But qualifying for an auto loan is not always easy. Credit mistakes, late bill payments, and low income levels can sometimes ruin a person’s chances for a loan. When this happens, people often ask why they were denied and want to know how to qualify for a loan through another lender. But there are ways that you can qualify for an auto loan even if your credit is not the greatest.

One of the best ways to qualify for a loan is to plan in advance. Stop making purchases with credit cards and pay off remaining balances before applying for a loan. This will help boost your credit rating and show lenders that you are responsible with your money. Making purchases on your credit cards before the loan has been processed may hurt your chances of receiving the loan. Try to hold off using credit cards until after you bring the car home. Even if you have missed a payment or two in the past, if you have consistently paid your bills for the past year or so, you should qualify for a car loan.

The type of car you want to buy will matter to lenders. Try to find cars that are within your price range. When budgeting for your new car, include monthly insurance payments. This will give you a good idea of how much you can spend without using up all of your available income. Many lenders will not grant loans to those who will use 60% or more of their monthly income on the car loan, living expenses, and other bills. Be sure to stay within your range and try to save a little extra money to use as a down payment. When lenders see that you are willing to put up your own money, they will feel more at ease about granting you a loan.

After you have found a car within your price range, and saved up money to use as a down payment, you will be ready to find a lender. There are many options for you to choose from including banks, credit unions, auto finance departments, and online lenders. You should start with your local bank because they will already know about your financial situation and more apt to working with customers that bank with them. Banks usually offer the lowest interest rates as well. If you belong to a credit union, then you should apply for a loan through them as credit unions can also offer low interest rates.

If you have already tried a bank, but have had little success, you can try the finance department at the dealership where you want to buy the car. They usually work with many lending institutions and will be able to match you with a lender that will grant you a loan. Keep in mind that you may have to pay a higher interest rate when going through the finance department, but it may be worth it depending on how much you need a car.

If you do not want to use the finance department at the dealership, shop around online. You will be surprised to learn that there are many lenders online that want your business. They are competing with other online lenders and traditional lenders as well. This means that they will be able to offer you a better deal even if your credit isn’t that good. Make sure that you research the lender before you contact them to find out if they are legitimate or not. You should also read all contracts before signing them in case there are hidden fees you were not told about.

Depending on your credit history, the interest rate you will be offered may be higher than you expected. If you can put down a larger down payment or pay off the car sooner than your original loan terms, this rate will go down. You should weigh all of your options when it comes to loan terms. If you cannot pay off the car in two or three years, do not risk it. Take out a loan for five or seven years instead. This will cost you more in interest, but at least you will be able to make payments each month.

Qualifying for an auto loan may require you to research your options and apply for several loans before being accepted. Planning ahead of time by getting your finances in order and finding a car that is in your price range will increase your chances. If you are buying a car for the first time and have little or no credit, you may also run into problems along the way. Being patient and trying different lenders will pay off in the end.

The free Auto Loan Calculator for Excel helps you plan your next car purchase. Calculate the amount you will need to finance, based on sales price, destination charge, fees, sales tax, down payment, cash rebate, and trade-in value of an older auto. Use the Payment Calculator worksheet to create an amortization table based on the amount you’ve financed. Analyze different loans to choose a suitable monthly payment and minimize the total interest.

Click here to download

You wanted an auto loan but the bank rejected your application. Of course, you wanted to know why you were being denied and with a sinking heart you hear that your credit score is so low that you are defined as a subprime customer. Of course, you will ask again what this subprime label is. Subprime means that you are a borrower with bad credit. This means that your credit score is below the score acceptable to the lending institution. The bank computes the credit score using various categories, which are payment history, outstanding balances, and length of credit history, new credit and types of credit used.

Not the end of the world

Being considered a bad credit customer is not the end of the world. You can still obtain an auto loan by applying for a bad credit auto loan. But here is the catch: a bad credit auto loan always means you will get higher interest rates. Luckily, there are many lenders who are willing to approve an auto loan with bad credit. Once you find one of these lenders, the next step is to negotiate the best interest rates that you can get.

First, evaluate your credit report and look for any errors. There is always a possibility that your credit report has a lower score than it should. If you find any errors, contact your credit offices and request for them to correct any errors.

Second, your credit report will tell you your credit score. If not, there are credit bureaus that can give you that information online. Knowing your score and that you have bad credit will give you a sense of where you stand if you get an auto loan.

Third, never apply for auto loans from a car dealership. They always have cuts on these deals and are therefore not giving you the best deal. Try to find your own bank or lender before going to a car dealer.

Fourth, look around at different banks, credit unions and online auto loan lenders. The rates vary from one to another. The more choices you have, the greater the chances that you will get a better rate. If you have a checking account, it might be better to ask your bank for a loan. Many banks tend to give credits to those who are regular clients.

The credit union is also a possible alternative. Before, credit unions would only give auto loans to members but this has changed in the past years. Non-members are now included for consideration.

Fifth, start immediately improving your credit history to move out of the bad credit category. Pay your bills on time and don’t overextend your credit. It usually takes two years to be able to improve the state of your credit so be patient.

A bad credit auto loan is a good choice for people with less than perfect credit. Consumers should take steps to know their credit score and work to improve their credit situation through patience and hard work.

You have to have a new car. Each time you drive your car, you are thinking of a new one. You notice all of your vehicle’s flaws – the dinged door, the rattle that you can’t find and the lack of a CD player.

You stretch and look each time to go by the car lot. You may even know exactly what you want.

It can be enticing, especially the new car smell.

But buying a new car goes much further than simply picking out all the options. If you want to get the most vehicle for your money, you will do a little homework. There are some essential steps that will help you avoid being fleeced. You know the stereotype of the car salesman. If you are well informed, she or he won’t be any problem.

Think of this as an exploration. You map out a game plan that gives you the upper hand. Knowing what you want gives you a huge advantage in the buying process.

This guide will help you in selecting, financing, purchasing and insuring your new vehicle. It may seem like a little work, but it may be the difference between getting the car you want and settling for a different one. You will find that the process is easy, and in the end it saves you money, time and aggravation.

Bad credit or no credit does not have to keep you from getting an auto loan anymore. Many companies specialize in helping people with bad credit get the car they have their hearts set on. There are still some general guidelines that many lenders follow, but keep in mind that each company is different so look around for the auto loan that will suit your needs best.

Here is some of the basic criterion that you must meet to be granted an auto loan:

Proof of income is required. In most cases the minimum required monthly income is $1,500 per month or $8.66 per hour with full time employment.

Applicants with no bureau score or rating must have been working at least 1 year for their current employer. Auto lenders look more favorably on applicants that have been working for their current employer for 2 years.

If you have a repossessions with a deficiency balance that is less than one year old and not included in bankruptcy, a cash down payment may be required for you to qualify.

Direct lenders that offer car loans have much more stringent underwriting criteria than the indirect car loan lenders available to some licensed auto dealers. If you’ve have bad credit and have been rejected for an auto loan in the past, chances are you were dealing with a direct lender.

Auto loans are just like any other form of credit. It is never free of charge. Remember that how much creditors will charge you for their services differ, so be sure to check out the competition. And always find out their rates before you agree to borrow from them. It is imperative that you review the terms of your auto loan before you enter into an agreement with the lender.

You will also want to take into account the amount of time you will be making payments. For example, you may get lower monthly payment rates over 3 years than over 2. However, the total finance charges over time are higher over a longer term.

There is nothing wrong with using an auto loan to purchase a car, just make sure that you are informed about your choices of lender. The right choice will make all the difference when buying your car or truck.

The Wall Street Journal reports that among the 21 largest banks receiving TARP funds, lending rates for all types of consumer loans fell by slightly more than 2% during February. Although these figures include auto loans, car buyers need not worry. Resources for auto loans include local banks, online banks, credit unions, and auto industry sponsored financing. Tightening credit highlights the importance of shopping for auto loans before looking for a new or used car.

Fast Loan Approval Not the Only Consideration

Consumers have traditionally put the cart before the horse when it comes to buying cars–they find a car they want before getting a for a loan to pay for it. There are disasvantages to this scenario including:

• Limited time for comparing auto loans: Dealerships may pressure you to accept the first loan they can find for you. Their interest is in selling a car, while the customer’s interest is in negotiating the best deal possible on a vehicle and auto loan.
• Auto loan approval provides limits: Customers who have prior loan approval know what they can afford to spend, and can focus on affordable options instead of falling for a vehicle they’ll have trouble financing.
• Negotiating power:Buyers who are pre-approved for auto loan may have more leveragein negotiating; a pre-approved auto loan indicates that the buyer is not “just looking”, but intends to buy. Buyers can also reaffirm their price limits by saying “I have loan approval for $25,000. how can you help me?”
• Pressure to accept first loan offered: Dealerships depend on selling cars, and facilitating sales through streamlined in-house financing increases profits. Getting the best deal on auto loans requires comparison shopping and making  informed decisions.  Shop for auto loans from several sources.
• Missed opportunity: Don’t forget to shop for auto loans online. Online banks have less overhead and may pass savings on to customers.

Shopping for auto loans before shopping for a new ride can help in finding a loan that’s affordable and provides the best financing terms. Getting a great deal on a car is made sweeter by getting the best deal on a car loan.

Your credit score is one of the most important numbers you’ll carry through life — like it or not.

No one asks if you want one. No one tells you when you get one. No one tells you what it is unless you pay to find out.

Yet this measure of your money management determines whether your application for a credit card, auto loan or mortgage is approved or rejected. Insurers use it to set premiums, and employers look at it when you apply for a job.

Our reports will help you learn more about:

* What goes into your credit score.

* Where to find free copies of your credit reports.

* How to get your credit score.

There are no shortcuts to improve a less-than-stellar credit score. Don’t even think about wasting money on credit repair companies promising to fix your history for a fee.

To improve your credit score, follow our 7 smart moves:

Smart move 1. Correct any errors on your credit reports.

Order free copies of your credit reports from Annualcreditreport.com and read them thoroughly to find errors. Removing inaccurate information can give your credit score a bump in about 30 days and costs nothing but postage. Just mark up your credit report with the errors you found, write a letter that explains the problems and ask the credit bureau to investigate.

Here is a form letter that tells you exactly what to say and where to send it. Be sure to enclose any proof you have to back up your claims and use certified mail with return receipt requested so you have a record that the bureau received the letter.

Smart move 2. Pay all of your bills on time.

We know you have a lot going on in your life. Bills get misplaced and writing checks is a pain. But you need a system to get every bill to every creditor, before the due date on your statement. (Our no more late fees worksheet may be able to help.)

More than a third of your score is based on your payment history, and the formula is heavily weighted toward your most recent record. Paying all of your bills on time for just six months can boost your score.

All late payments are equally damaging to your credit score, so do everything on time: Pay utility bills, pay parking tickets and even return library books before their due date.

Smart move 3. Use every credit card you have.

Credit cards that never see the light of a cash register don’t contribute to your payment history. Rotating charges among all your cards, and making all of the payments on time, can build a good payment history more quickly.

Smart move 4. Pay down credit card balances.

The next biggest factor in determining your credit score is how much of your available credit you’ve tapped. If you owe $6,000 on a card with a $10,000 credit limit, that means you’ve used half of your available credit — and that’s too much. Try to keep your debt-to-available-credit ratio below 50% on every card.

These calculators can help you find the fastest, cheapest way to repay a single card or all of your cards.

Smart move 5. Don’t apply for credit on a whim.

Your mailbox may be full of credit card applications offering low, low rates for a few months. And cashiers often push you to get a store charge card when you check out, tempting you with a discount on your purchase if you’ll just fill out their form. But if banks and stores are constantly asking the credit agencies for your credit history, your score suffers. As a general rule of thumb, figure that every inquiry costs you 10 points.

Smart move 6. Ask to have a repaid debt taken off your credit history.

If you’ve mended your past-due ways and brought a delinquent account up-to-date, ask the creditor to remove unflattering entries from your credit reports. You’ll have the most leverage if it’s an active account that you’ve paid on time for at least a year.

Just write a letter and ask. It’s certainly better than allowing a bad debt to sit on your credit report until the agency removes it after seven years.

Smart move 7. Become a cosigner on an established credit card.

The account will appear on your credit history with the original opening date (not the date when you were added to the account) along with its entire history of on-time payments. That can add 30 to 45 points to a poor credit score.

You’ll need a spouse, parent or astoundingly good friend who’s willing to add you to their account as a cosigner with legal responsibility for the debt. Being an authorized user, someone who can make purchases with the card but isn’t responsible for making the payments, will no longer help with your credit score.

Will all of this really work?