Because the majority of loan terms are dependent on your credit history, it’s always harder for low credit score borrowers to get approved. However, now through the end of 2012 will be the best time to get a car loan or refinance your car loan regardless of your credit. And if you have bad credit, your chance for car loan approval is better, and your ability to negotiate terms is much greater.
First things first, take a look at your credit history and credit score, and decide what you can change to make your credit even better before you approach a loan company. Credit scores range from 350 to 900, 350 being very poor credit and 900 being pristine credit. Usually, credit scores are defined in these levels listed below:
- Below 550: Poor Credit
- 550-650: Less Than Acceptable
- 650-750: Acceptable
- Above 750: Near Perfect
If you are on the edge of one of these levels, it would be worth your time to put some effort into fixing your credit history. Your credit score is affected by your payment history, outstanding balance, account age, types of credit and number of inquiries from your creditors. It’s best to attack all these components at once, but if you’re in a time crunch or overwhelmed by the bulk of fixes, pick one or two. The most influential factor on your credit history is your payment history and outstanding balance. To attack these, make sure you’re making your payments on time, and your balances are at least 30 percent below your credit limit. The lower you can make your balances, the better your credit score.
When you’re ready to start applying for loans, select a modest compact or midsize vehicle. Budget your expenses properly and save for a car that fits your needs. If you approach a lender with poor credit and risky loan terms (like long term, high payment terms for an expensive car), you’re more likely to be denied. Smaller cars will give you a lower interest rate and a lower insurance cost. In addition, you’ll spend less money on gas, and spend less time maintaining this car as smaller cars usually need less upkeep over the years. (TIP: Driving appropriate speeds and making sure your tires are always inflated properly is another way to save money on gas!)
Next, find a lender who specializes in car loans for bad credit borrowers. Although there are a lot of car loan companies out there right now, many of them have done loan shoppers a favor by advertising their specialty (i.e. loans for poor credit, refinance loans, simple interest, long/short term, etc.). Car loan companies who do most of their work in refinance will be much more comfortable working with you, and will give you advice and tips to help lower your interest rate, too!
Last but not least, try to get approved before you go to the dealership! Especially with poor credit, you’re less likely to get a good deal if you just walk into the dealership and let your salesperson negotiate with you. Walking in with an approved car loan will give you the advantages of a cash buyer. You’ll also stick to your car budget much better with a loan in hand.
This fall is a great time to apply for a car loan. The prices are still low from the recession, and so are the interest rates. Even with bad credit, you’ll reap a lot of benefits by applying now.
4 Factors That Will Increase Your Chances of Getting a Car Loan
Are you looking to buy a new or second hand car? Don’t have enough cash? Then you are most likely looking at other ways to finance your purchase such as a car loan. The following tips are basically key elements that will help you get approved for car finance, these elements are not isolated from each other, they all pay a role in the overall formula:
Deposit
There more money you put down as a deposit, the less you will have to borrow and the less you will have to pay back. If you can afford 25% of the value of your vehicle, your chances of being approved for car finance are significantly high. Needless to say it will also depend if you are buying a new or second hand vehicle and what the resale value of that car might be.
Credit Rating
Your credit rating is probably going to be the most important piece of information that lenders will look at which will help them determine whether you are eligible for a car loan or not. In the UK your credit score goes from 0 to 1000 and falls into the following categories:
Very poor: 0 – 560
Poor: 561 – 720
Fair: 721 – 880
Good: 881 – 960
Excellent: 961 – 999
There are many factors which help determine your credit score, such as if you are on the electoral roll, if you have lived at a permanent address for more than 3 years, if you have any outstanding debts or defaulted on any payments, how frequently you have applied for loans and if you have been rejected or not, and many others. Generally speaking the more stable you are financially, and more credit card bills or loans that you pay off in time will help boost your credit rating.
Amount Borrowed
The amount borrowed is of course one of the main factors which can make or break your application for a car loan. It isn’t as straightforward as it seems, it’s not just a case of ‘the less borrow, the more likely you will get approved’. Car finance brokers are looking to make money and profits, so they aren’t particularly focused on lending small amounts and charging low interest rates. Ideally they would like to be in a position where they can lend large amounts as this will generate more profits for them!
There are other elements that they will take into account when looking to finance your car, such as your credit rating and history, the amount you choose to borrow, how much deposit can you provide, the time-span you plan to pay it back in, and needless to say which car you choose to purchase. All of these elements play a role in their risk and profitability formulas that lenders will use to determine if you are eligible or not.
If you’re looking to borrow larger amounts, you must be in a position to provide a decent deposit (over 10% of vehicle cost), have a clean credit history and be purchasing a car which offers good re-sale commerciality. Lenders look into the re-sale value of a vehicle in case they have to repossess the car and sell it at auctions or elsewhere to gain their money back.
Value of the Car
The value of the car you plan on purchasing will have a significant importance on the outcome of your finance application. Lenders usually appreciate capital protection when lending money to someone who plans to buy goods such as cars, as it guarantees them some security in case you fail to make the repayments.
They don’t just take into account the value of your desired vehicle, needless to say, the other factors such as your initial deposit, credit history and monthly repayments will play a big role in determining your outcome.
For example, if you are looking to buy a brand new Mini Cooper, which has a strong market value and is popular by demand, and you have a 25% deposit, the chances of getting car finance will be pretty good. On the flipside, if you are looking to buy a second hand, unpopular car model (lets say a Hyundai Atos for example), and you have less than 10% deposit, lenders aren’t going to be so willing to finance that purchase as it offers them less security.
The Advantages of Car Title Loans Over Bank Loans
A lot of times, emergency situations do not happen in times where substantial amounts of cash are present. In fact, it often occur a couple of days before payday and when there’s nothing left in one’s savings account.
It is a good thing though that those who encounter small emergencies can always turn to car title loans. The said loans are very flexible and those who need instant cash can obtain amounts that are under USD 500. They can also obtain higher amounts, given that they have the financial capacity to repay them.
The Practical Side of Car Title Loans
Such move is a practical thing to do because getting several payday loans might make things even worse. While conventional loans that are provided by banks are everybody’s preferred option, the benefits of car title loans Orange County and other similar choices should never be neglected by those who are in tough financial spots.
Applying for car title loans enables individuals to fully utilize the equity of their vehicle. On the other hand, potential borrowers should make sure that the car that they will use is fully paid off. Otherwise, they might flank the application because some lending companies such as title loans Orange County specify them in their requirements.
The Convenience of Car Title Loans
While some lending companies allow their clients to use cars that are not fully paid off, such stipulation may be risky. For instance, what would they do if unwanted circumstances prevent them from sending loan payments? This circumstance may translate to more serious financial difficulties.
Contrary to many beliefs, qualifying for car title loans is not time-consuming and complicated. Borrowers simply need to submit the necessary documents and wait for the feedback of the personnel of car title loans.
They only need to submit ownership documents, social security details, certificates of employment, and paperwork that state the source of income. Many lending companies do not require their borrowers to work full-time, as such; availing car title loans can be a walk in the park for some.
Conclusion
In the end, it can be concluded that compared to conventional loans that are offered by banks, car title loans are more convenient and practical. With the latter, borrowers do not have to undergo scrupulous credit history checks and submit several documents.
Due to the abovementioned advantages, individuals who need to obtain emergency funding should not hesitate to avail them. This is because doing so can be one of the best things that they can do in times of financial struggles.