Bad Credit Auto Loans

How To Get a Good Loan With Bad Credit

For whatever reason, you don't have the best credit rating right now. However, it's not as big a problem as you think. What you need to do is find a lender who specializes in bad credit car loans without charging an arm and a leg in the process.

Bad credit auto loans - benefits to shopping online:

First, it's not embarrassing like it is at the bank or the credit union.
Second, all the major lenders have a bad credit car loan program.
Third, sites like E-Loan represent all the major lenders.
Compare the best offers all in one place.

Changes in the bad credit market
Chances are you'll be able to land an auto loan. Today, banks, credit unions and finance companies are all making loans to people with flawed credit. Many people who wouldn't qualify for an auto loan five years ago can get one now.

"They've loosened credit standards to the point that anyone can get a car," says Art Spinella, vice president of CNW Marketing Research in Bandon, Ore. "It's banks. It's finance companies. It's everybody."

Work to build up your savings
How good a deal you get will depend on how many bumps you have on your credit and how much work you're willing to do before setting foot in an auto dealership.

Remember, dealers want everyone to buy their cars, and that includes folks with dinged or damaged credit. So in addition to offering financing from a manufacturer's finance company, such as GMAC and Ford Credit, they also have financing deals with banks, credit unions and finance companies.

Dealers offer bad credit auto loans
"The finance manager is going to find someone to approve your loan. It's just a matter of what you're going to pay for it," says Fritz Elmendorf, a spokesman for the Community Bankers Association. "It may not be the best rate out there, but it will get you in a car."

But also remember, dealers take a cut of all financing deals they land. So a loan from ABC Bank through the dealer may have a higher interest rate than the loan you'd get if you applied to ABC Bank on your own.

Watch out for high rates
Interest rates on loans for folks with bad credit range from 11 percent to more than 20 percent. The key to landing a better rate is to shop around.

"Not every place right off the bat will offer you a good rate," Elmendorf says. "One company may offer you 15 percent. Another may offer you 11 percent."

Check credit report for mistakes
Before you start comparing rates, be sure to get a copy of your credit report.

Check to see that all information is accurate and up-to-date. The last thing you need is to get bumped up to a higher rate because of an error.

If you spot an error, dispute it in writing with supporting documentation. The reporting party has 30 days to support their claim or the the item will be removed from your credit report.

Consider banks and credit unions
When shopping for bad credit car loans, be sure to swing by your bank or credit union.

"The broad trend among banks is to service customers almost regardless of their credit standing," Elmendorf says. "They do not want to turn a customer away, particularly if it's a customer with a checking account or another relationship."

A larger bank may have a whole department devoted to lending to people with flawed credit or they may have a relationship with a company specializing in sub-prime lending.

Smaller banks are more apt to approve loans to folks with credit woes on a case-by-case basis. The more accounts you have at the bank the better the chance they'll be willing to work with you. The same goes for credit unions.

Meet the banker face to face
It's a good idea to apply for an auto loan in person. Screw up some courage and look the loan officer in the eye. Be upfront about the problems you've had in the past. Did a divorce, illness or accident throw you off track? Let them know.

"I've had people come in and say 'I know I had some problems in the past and I want to tell you about it' -- I like those people," says E.C. Williams, chair of the lending council for the Credit Union National Association and senior vice president of MacDill Federal Credit Union in Tampa, Fla.

"It speeds things up. You've got eyeball-to-eyeball contact. You've got the ability to address any glitch at that moment in time."

That "glitch" may have been a Sears bill that you paid 30 days late when you were between jobs. Those details can make a difference. And that's information that a loan officer can't get from an online application or application referred to them from a dealer.

Credit unions offer bad credit car loans
When it comes to auto financing, credit unions have had a reputation of delivering low-interest rate loans to members with good credit. But that's beginning to change.

While some credit unions still have an all-or-nothing approach to financing -- you either qualify for a low-interest rate loan or you don't -- others are offering a range of rates. This tiered approach to loan pricing allows credit unions to offer loans to members with all levels of credit.

The practice of offering a range of auto loan rates, known as risk-based pricing, is common among banks and finance companies as well.

Line up financing first, then shop
So auto loan choices for people with dinged credit are out there. It's just a matter of tracking them down.

Start early: Applying for financing before you start car shopping will also help you narrow your auto search.

Finding out how big a loan you qualify for and at what rate can help you determine what kind of car you can realistically afford.

When it's time to hit the dealership, consumer experts urge folks to look at an auto purchase as three separate negotiations: the price of a car, the price of a trade-in and the financing.

A car salesman will try to lump this stuff together. Don't let him.

"It's kind of like a shell game. They'll move the profit around so you won't be able to find it," says Jean Ann Fox, director of consumer protection for Consumer Federation of America.

Blinded by the interest rate
It's easy to get talked into a bad deal. For example, you may be so thrilled at the interest rate the dealer is quoting on the loan that you may not notice when the purchase price of the car gets bumped up.

"We've seen people pay $2,000 over blue book," Fox says.

Avoid on the spot delivery
Some dealers will urge you to go ahead and take the car home while they complete the financing. Don't do it.

There's a good chance that they could come back and tell you that they couldn't get the financing deal they promised you. You may have to cough up a bigger down payment or pay a higher interest rate or both.

Check the car out thoroughly
Be sure to get a used car checked out by an independent mechanic.

"If they don't let you do it, that may be a warning sign and you may want to go somewhere else," says Steve Rhode, president of Myvesta, a non-profit debt crisis center.

Avoid buy here, pay here dealers
Visit "buy here, pay here" car lots as a last resort. These lots, while specializing in customers with problem credit, have some of the highest auto prices and auto financing rates around. Don't sell yourself short.

"A lot of people assume the worst and don't try," Fox says. "You shouldn't give up without trying to see if you can get a loan at a more favorable interest rate."

Bottom line
If you find an interest rate online that is lower than your current interest rate, odds are you are going to save money.

Today, more and more savvy consumers are recognizing the savings that can be earned by refinancing their auto loan online.

The Internet has become a great way for car buyers to apply for low-interest loans with no down payment, no application fee, and no prepayment penalty-all from the comfort of their home or office.

If you're looking for an easy way to save money and willing to invest 10 minutes, take the time to go online. You'll be amazed to see just how much refinancing your car can save you.

Golden rule of bad credit auto loans
Don't wait to begin repairing your credit. Then shop around online for the best offer you can get. The sooner you buy a car at a lower interest rate, the sooner you'll be saving money on your car loan.

E-Loan has great bad credit car loan rates
They represent all the major lenders. That's why it pays to shop your bad credit auto loans through E-Loan.

You can have a check in hand tomorrow to refinance your car. All you have to do is fill it out and send it in.

Apply online at E-Loan today. It's quick (takes 5 minutes), fast (you're approved in 15 minutes), and easy (it's a very short form).

Plus, you can't beat their low rates!

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