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Auto Loans
With the economy being slow, it is harder for people with all credit ratings to get auto loans. Auto loans for those with good, bad and fair credit are declining, due to the stricter guidelines for auto loans from the economy& 8217;s downfall. Banks are becoming more selective when it comes to approving the financing of new or used autos, considering the sizeable losses that many have previously taken due to nonpayment.
Bad Credit Auto Loans
Look at your credit history to determine what type of credit you have. It is a hard task indeed for those with bad credit to find financing for a vehicle, even when the economy is in better standings. The biggest concern for those with bad credit is not finding a vehicle you like, but finding one you can afford and actually get auto loans to pay for. Many dealerships will offer financing through a company they normally work with for those with bad credit. There are criteria that have to be met for you to become approved, so you should not assume you will be approved even if the car lot or dealership says that you will. Review your own history to know about your credibility.
Finance companies look at outstanding accounts, revolving accounts and repossessions. The number of closed accounts in good standing should be higher than the number of accounts open in bad standing at all times. With bad credit auto loans, you can expect to pay a higher interest rate, and have higher payments than with any other auto loans. The reason for this is that the finance company feels that those with bad credit are at a higher risk of not paying back the loan. Find financing prior to looking for a vehicle, so that you know how much you have to work with, and where the loan will be accepted.
No Credit Auto Loans
Those with no credit have as hard a time finding auto loans as those persons with bad credit. This is due to the fact that when the credit history is pulled from the major credit reporting agencies, there is no information. The finance companies or banks have no prior information to make a decision on, and therefore most of the time will require a cosigner. The cosigner must have good credit and be willing to pay back the auto loans if the other signer does not pay. No credit history would mean simply that there have been no credit cards used or owned, no loans of any kind including student loans, and no revolving credit from chain stores such as electronic or department stores. If approved for auto loans with a cosigner, you can expect to pay a slightly higher interest rate because of the lack of history for a company to make a decision on and therefore you may be a high risk customer.
Good Credit Auto Loans
Those with good credit rule the world. With good credit you are able to obtain auto loans through most banks and finance companies with a small down payment. Interest rates can be quite low, and if taking advantage of a financing promotion, those with good credit can even have part of their loan forgiven over a period of on time payments.
Bad Credit Auto Loans
Bad credit auto loans are among one of the highest non-paid loans in America. With higher interest rates and lower approval numbers, bad credit auto loans are few and far between. Many companies offer bad credit auto loans, but whether or not you decide this is the best company for you is key.
Companies
One of the lowest interest rates available for bad credit auto loans is 21%. This is much higher than the average 10% that good credit consumers are offered. The reason behind the higher interest rate for those with bad credit, is the finance companies and banks feel that those with bad credit are a higher risk when it comes to paying back the loans. They make this decision by looking at your credit history and whether or not the history shows instances of overextending or overspending. Research companies prior to deciding on one, even if that one is highly recommended by family or friends. That company may have been ideal for their needs, but every credit report and consumer is different.
Look for companies that offer a fixed interest rate, and not a variable one. Variable interest rates mean that one month your payment may only be $400, but the following month if the interest rate is higher, your payment will be higher as well. Companies that offer early payoff restrictions should carefully be considered. Some will fine you with a penalty for early payoff, while others will forgive a portion of the loan after making a few years of on time payments. Companies that offer you the possibility of rechecking your credit history after a year and then lowering payments should also be considered, as your payments could become lower.
Interest Rates
Interest rates are a major part of bad credit auto loans. As of now, there are banks offering 4.9% APR or annual percentage rates for good credit. Bad credit auto loans are seen as high as 29% APR at this time, which means that even though you have bad credit, and it has been shown by your credit history that you have a hard time paying on time, you will pay more than those with good credit. To a consumer, it does not make sense to put more payments on those who cannot afford it, but to banks and financial institutions, bad credit consumers are a possible loss. With higher interest rates, the payment goes up and normally the time period of the loan goes up as well.
Budgeting
When looking for a bad credit auto loan, decide how much of a payment you can really afford. Not the high end and the low end, but what you can actually afford with all of your other bills. IF you budget yourself within $300 of your bills, then you can& 8217;t actually afford that $300 payment and would have to go lower. This will help you decide what company to go through as well. Some companies will only finance new cars, in which case a payment would be well outside of your means. Complete a budget of all your bills and decide what payment is comfortably able to fit into your expenses. This will help guide you to a company that offers the options you need.