Do You Know what Your Credit Score Is? Or Maybe have an idea what it might be? Then Jump Right To These Proven Methods for Getting a Car Loan if you have poor or bad credit!
If you think you have Bad Credit yet don't know what your Credit Score is, you'd better find out...before a slick-talking Bad Credit Finance Manager picks-your-pocket for more than $3,000. Read "Personal Credit Reports - Your 'Grown-Up' Report Card".
This report gives you the knowledge you need to make the decisions that will save you thousands!
Discover Just How Much Those With Marginal Credit, Poor Credit & Bad Credit Get Ripped Off!
Did you know that a good Special Finance Manager will make $250,000 to $300,000 a year. These folks can work out of gleaming, brand-new Dealerships....or even those small, private lots on various street corners throughout the U.S. Whether you're looking for a new Domestic model, a Japanese model or just a decent used car, special finance managers have an office in almost all of them.
More recently, 100's and 100's of Special Finance Web Sites have been popping-up all over the Web offering to provide car loans to those with bad credit.
The fact is, providing Loans for people with bad credit is extremely lucrative. And it's lucrative because the processes in place are set-up to take advantage of those that are unaware of the real options they have.
So....do not Apply For Car Loans all over town and on the Internet....and do not go near a Car Dealer till you know exactly what to do for your particular situation.
How To Get A Better Bad Credit Car Loan....And A Better Interest Rate
The 1st step....you must know what your Credit Score is. If you do not, it's like going to a gun-fight armed only with your fists - you are going to lose....and lose big! Knowing your score is the only way to be on equal-footing with Dealer's and Lender's.
If you've recently checked your score, good for you - memorize it and be ready to defend it when you begin this process. The rest of you? Here's how it's done.
Congress has recently passed legislation that allows each of us access to 1 free Credit Report a year (see Personal Credit Reports - Your 'Grown-Up' Report Card". It's a great way to find out what your Creditors are saying about you. However, they can be difficult to understand....and they don't show what your Credit Score is!
And although both are used in most Loan decisions, the Credit Score, not the Credit Report, is what typically is used to determine whether you'll get a car loan and at what Interest Rate.
Unfortunately, to get your Credit Score, you have to go to the source....and their are only three.
- Experian
- Equifax
- And Trans Union
Each Lender in the U.S. has an existing contract with one of these three Credit Reporting Agencies. When you're trying to get a loan, credit credit or even insurance, the Lender will request a Credit Report and Score from one of those companies. The problem with that is, you don't know which Company the lender is using.
My suggestion is this - you don't need the info from all three. One is good enough. I recommend using Trans Union because they use a very strict scoring model. If the Lender you end-up working with uses one of the other two companies, you're in good shape because your Credit Score will actually be higher.
Will it cost a few dollars to get this info? Absolutely - the last time I checked it was $14.95. Is it worth it? In my opinion, yes. Because if you have Bad Credit and need a car loan, having this information will more than likely save you a minimum of $500 before you sign your Loan Contracts for the car you're needing.
I'll show you how and why you'll save $500 as you review the Credit Grading Systems below! So make sure you get the info you need by visiting Trans Union.
Although there are exceptions that vary by region, the guidelines below are generally what Lenders use to "grade" your credit history and ultimately set your Interest Rates.
If you don't plan on getting your Credit Score and you're not sure on your exact score, begin at Tier 2.
Credit Scores & Car Loans: What Are Your Real Options
Here are the 5 recognized credit scoring Tiers and what your real options are for each situation.
- Tier 1 - 700+ Score: Considered excellent by lenders and typically offered the best rates.
A person with these scores should have no problem getting a car loan. The only exception - if there is a Bankruptcy on file in the recent past. That individual needs to consider what is suggested for a Tier 3 or 4 Credit Score. - Tier 2 - 650 to 699 Score: Considered good by lenders and typically offered interest rates 1% - 4% higher than Tier 1 borrowers
Folks with these Scores should only apply to the following 5 Loan Sources in the order shown.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 2 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
To find a Credit Union in your area, try the National Credit Union Administration or the Credit Union National Association. They both have search options to help locate a Credit Union near you. - Your next stop is Capital One, one of the largest online Lenders in the world. They have any easy application process, very good interest rates and you can get your check the next day.
- Next, make sure you visit E-Loan.com - they've been in business for years, have a quick application process and have provided Loans to millions of car buyers.
- Fourth, hit your own Bank for the Car Loan. If you've been doing business with a bank for while, see what they can arrange.
- An lastly, apply for your car loan with the Dealership that you're going to be buying the car, van, truck or suv you're considering. They'll be able to offer the Car Makers Loan products or, have a decent offer from a Local bank.
Make sure you utilize all five sources - you're bound to get at least two very attractive offers. All you need to do is choose the best one. If you have a recent bankruptcy still impacting your credit history and score, you'll need to look at Tier's 3 and 4 for help.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 2 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
- Tier 3 - 600 to 649 Score: This score is considered fair by lenders and typically you're offered rates between 8% and 10%.
Folks with these Scores should only apply to the following 6 Loan Sources in the order shown.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 3 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
To find a Credit Union in your area, try the National Credit Union Administration or the Credit Union National Association. They both have search options to help locate a Credit Union near you. - Time to go visit Road Loans - a subsidiary of Capital One that writes loans specifically for people in the Tier 3 Grade. The link above will take you to the section on Loans to be used if you're buying from a Car Dealer. The following - Road Loans - Private Party Purchase is where you need to go if you're not buying from a Dealer.
- Your next stop is Capital One, the largest online Lender in the world. They have any easy application process and you can get your check the next day.
- Next, make sure you visit E-Loan.com - they've been in business for years, have a quick application process and have provided Loans to millions of car buyers with Tier 3 Scores.
- Your 5th stop is your own Bank - ask them for a Car Loan. If you've been doing business there for a while, see what they can arrange.
- An lastly, apply for your car loan with the Dealership that sells the car, van, truck or suv you're considering.
With 6 applications, you're more than likely to get more than one offer - simply choose the best one. Your chances at securing a favorable interest rate are significantly increased if you have cash to put down or a trade-in to be used as a down payment. If you have a bankruptcy and get turned down here, move on to the the next Tier and the options that are presented there.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 3 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
- Tier 4 - 500 to 599 Score: - considered poor by lenders and typically offered rates between 10% and 22%.
Folks with these Scores should only apply to the following 6 Loan Sources in the order shown.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 4 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
To find a Credit Union in your area, try the National Credit Union Administration or the Credit Union National Association. They both have search options to help locate a Credit Union near you. - Your next stop is Road Loans - a subsidiary of Capital One that writes loans specifically for people in the Tier 4 Grade.
- Next, make sure you visit E-Loan.com - they've been in business for years, have a quick application process and have provided Loans to millions of car buyers with Tier 4 Scores.
- Now it's time to hit your own Bank for the Car Loan. If you've been doing business there for a while, see what they can arrange.
- Apply for your car loan with the Dealership that sells the car, van, truck or suv you're considering.
- An lastly, apply for your car loan with a large, recognized online Bank that only lends to those with Bad Credit and funnels their applications to their own Dealer Network.
I do hope you have a couple of minutes to review what I have to say. It'll keep you form getting hammered with a lousy, and very expensive car loan. OK - here we go.
Obviously, there's a lot of garbage out there - in fact, there's hundred's of Web Sites to choose from. Remember this though - most are fly-by-night operations that don't even deserve a second look.
I recommend contacting only these two Online Lenders - I've worked with both in the past and folks with Bad Credit had a lot of luck getting their Car Loans approved.
- Auto Yes - For Bad Credit Car Loans: They have one-minute application that's very easy to complete, and there is no cost or obligation.
- Driver Loans - Bad Credit Car Loans: The application takes just 60 seconds to complete applying with DriverLoans.com is 100% free with no obligation whatsoever.
Either of these two companies is likely to be able to arrange a car loan so you can complete your car purchase. Their application process is simple and fast - in fact, you'll be contacted by a representative of the Bank or someone from a Dealership in their Network, shortly after completing it.
Here's a review of how this works:
You'll be invited to visit at least one Dealership - hopefully two or three. Wait 2 or 3 days to give their Dealers time to contact you and then go ahead and make plans to visit. Do not have a particular car, truck, van or suv in mind - you actually will have very little say in the matter.
The reason - because you are considered "high risk" by the lenders, you will not just get to pick the vehicle you want. The Bank is writing the Loan so they get to call the shots. You'll likely not be shown new vehicle's but steered to "newer used" vehicles. If, by chance, you get to choose a new vehicle, make sure the payment is affordable before you sign anything. You'll also find that the price is very rarely negotiable - but it doesn't hurt to ask.
You do get to have a say on the vehicle choice, though. For instance, if the Dealer steers you to a 2-door Coupe and you have a family of 6, just tell them you're nor interested. Only focus on the car, van, truck or suv that meets your needs.
And make sure whatever you settle on comes with a very good warranty. If there's no warranty, I strongly suggest you look at other alternatives or even another dealer in the network.
If you do not find a vehicle that fit's your needs, move on to another choice or another Dealer. If you're successful in finding a car that meets your needs, it's time to get down down to the nitty-gritty.
Through this entire process, there's typically one thing that aggravates more people than anything else - you'll never be told what the exact interest rate is on the car loan. You'll either get an evasive answer, or no answer at all. Here's why.
In almost every State in the Country, Dealerships that participate in these Networks add 2% to 5% on top of the Interest Rate the Bank is going to give you. It's a simple pay-back to Dealer for writing the Loan on your car. And yes, it's legal.
So, if you're looking at a $20,000 Sedan, and the Interest Rate the Bank is giving is 14%, the Dealer will write the Loan at, let's say, 17%. That means that instead of paying $418 a month for 60 months, you'll pay $448 a month. That's $1,800 more....and it's going right in the pocket of the Dealership.
When it's time to actually sign the paperwork, you'll finally get to see the actual interest rate and term you'll be getting. This is what you say -
"I think that rate is a little high. I've been offered a loan for a similarly priced vehicle with a rate that is 1.5% less. I'd like to do business here, but the Rate has got to be equal to what I've already been offered."
Maybe the Dealer will bite - maybe they won't. Whether you're working with multiple Dealerships or not, this is perhaps your only real shot at keeping some of your money. Is making the statement above worth the effort? Well, a 1.5% reduction in the interest rate means keeping $1,000 in your pocket. I think it's worth it - I hope you do to.
Hopefully, you'll be successful in these steps....and even keep some of your money. I really do hope so. Because the only option left (see the next Tier) is not very very attractive.
- A Credit Union - Contact your Credit Union - or join one ASAP. Many times, the Loan review process at Credit Unions are a bit more relaxed that at a traditional Lender so those with Tier 4 credit have a better chance at securing a loan with a favorable rate. Make your calls and ask if they are accepting new members. If they are, ask to speak to a Loan Officer. Make sure they know you'd like to join....and then simply explain what you're after.
- Tier 5 - 350 to 499 Score: Considered as very poor credit by lenders and typically offered rates similar to what the Mafia lends at - or even worse - a buy-here, pay-here lot.
If you have a score that fall in this range, you have only two realistic options.
I don't have any magic strategies that will help with these sources. You're really have to play by their rules. However, I'll make two recommendations when dealing with these type of places.- The Buy Here - Pay Here Car Lots that are in every city and town in the U.S.
- In-House Special Financing at Franchised Dealers: Pay attention to the T.V. advertising - that's how you find these folks.
1. If at all possible, buy the newest Japanese model you can find. They tend to be more reliable, even on older model cars, trucks, vans and suv's. It's your money. Spend it wisely.
2. Make sure you make the payment on time every single month. These folks are ruthless in their business practices. If you miss a payment, it'll be repo'd immediately.
Tom O'Leary is an Automotive Portfolio Analyst, Author and has been called a modern-day "Robin Hood" for his efforts in helping the Automotive Consumer.
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