If you have bad credit or no credit and you are thinking about an auto loan you have probably wondered what your interest rate is going to be.  First of all, I will break down a common scenario.  First, you apply for auto financing on-line.  Next, you receive a call from a special finance manager verifying your info and then telling you that they want you to come in to get squared away.  The problem is you’ve already been to a few dealerships and they couldn’t help you.  This is probably the most common scenario.

If you have started your auto purchase quest by going to the first dealership with a pretty car you could experience a lot of issues.  For one thing if you have a difficult finance situation, they may not be set up to help you.  They will either go through the entire sales process then discover that your credit is less than prime and have you get a ton of documents only inform you later that they can’t help you or just blow you off right away.

The dealerships with a true special finance department are going to know what needs to be done in order to secure an auto loan for you.  When they ask you to come in with your documents they have a plan from the get go.  If you are wondering what your monthly payment or what your interest rate will be, you have wondered the same thing that someone with perfect credit has also wondered.  Before you get to far though, please realize that they can’t quote anyone an interest rate before they have a car and a deal structure.  Just because you have less than perfect credit, don’t assume that they are picking on you when they want you to come down to the dealership.  A dealer needs to take things one step at a time.  I know searching for a loan can be a frustrating situation but it will only be harder if you fight the process.  Car dealers can’t sell you a car over the phone; even if they could how would you know if that particular car was going to work for you?  Whether you have perfect credit or the worst credit in the world you owe it to yourself and to the finance manager that is working hard for you to go through the motions just like everyone else and find the right situation.

Once you have found something that will work for you, the finance manager can send over any info the lender in requesting, such as your check stubs and then find out what terms the bank needs to see to secure you’re financing.  Please keep in mind that each situation could lead to different interest rates, different amounts of down payment and even different loan terms.

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If you are considering a new or used car purchase, you may have wondered “is it better to get dealer financing or to go through your own bank”.  In order to figure this out you will need to look at what each option entails.

If financing through your local bank, you may need to do a few extra steps.  First, if financing through your own bank, it may be helpful to make sure they even have an auto finance program that will suit your needs.  If you are going to look at cars that are ten years old you should make sure that your bank will even finance cars that old.  Once you have talked with your banker about what programs they have and if they will suit your needs, you should go out and purchase a car.  From there you can bring your purchase contract to the bank so they can process the information and approve or deny your request.  Please note, your lender may not want to finance the full value of your car, in this case you will need to give the dealer the balance of the money due.

If financing through a dealer, you can skip the first portions of this process and go straight to picking out a car.  Once you have found the right car, simply give the finance department your info and they can do all the finance work for you.  Dealerships are happy to make this part easy since they cannot sell you a car unless you either pay cash for your purchase or you get financed.  Many dealers will have access to dozens of lenders so their will likely be more finance options.  The dealership may even have a relationship with your lender and be able to get your loan approved with them if you prefer.  Many times, dealers will offer an incentive to use their financing.  They will do this because they may get paid from their lenders to secure your finance.

Someone looking to get auto financing may only finance a car even two to ten years.  Many dealers finance a hundred or more cars per month so they can get loans at a discount.  If you go to Wal-Mart you can expect a low price because they have huge buying power, dealerships can offer the same benefit and maybe even get you a lower interest rate than your bank.

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If you have bad credit and need an auto loan you may be stuck trying to decide what you would be better to try for a new car or a used car. Many people would like to have a brand new car if they didn’t need to consider monthly payment, depreciation, and total cost. If you have bad credit there are a million variables at play here, I should address a few of those variables.

You need to consider your end result, if you can’t afford a big payment you can’t afford an expensive car. New cars cost more than used cars and with a higher interest rate than someone with excellent credit you will have a higher payment. Keep in mind that on a regular term of five years, your payments could be 25 to 35 dollars per thousand that you finance. On a ten thousand dollar loan, that means you’ll pay $250 to $350 per month.

In a bad credit situation, the dealership will most likely need to absorb a fee from the bank. Fees vary from $95 to over $5,000 and they need to be absorbed into the deal without passing a fee on to the buyer; this is usually more difficult to get over the worse the buyers credit is and can become very difficult to do. If a bank will approve your loan they may issue whats called a conditional approval. Once a dealer can match the banks terms they will allow the loan. A bank will usually allow a low percentage of the value of the vehicle to be financed by the buyer. The dealer must also absorb the banks fee without marking up the car. A new car has a given rate of mark up between invoice price and the manufacturers suggested retail price (M.S.R.P.) and hence can absorb a given amount of fee from the lender. Some new cars have more mark up than others do but, generally speaking it is harder to absorb a lender fee into a deal on a new car because they don’t have enough mark up.

Hopefully, if you have bad credit and are buying a car, you won’t always have bad credit and will use this car loan to get yourself re-established. Since you are using this loan to get back on track, you may want to have a loan that you can get out of once you have improved your credit. Once you have improved your credit, you will be have more options of what you can buy and should have a lower interest rate. If you buy a new car it will take longer to get out of your negative equity because the highest depreciation takes place in the first two years.

Don’t get in over your head on a temporary situation. If you plan on rebuilding your credit with your next auto loan, don’t go out and make a bad decision, don’t go out and get yourself buried in a car that you won’t be able to get out of when you are re-established.

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If you need a car loan and live in Ohio but have bad credit you may have wondered why it’s so hard to find financing.

Once again it’s tax season. The time when people scurry to file taxes in hopes of getting the biggest refund possible. Many people that have bad credit are going to need a vehicle loan and are wondering how much if any, of their tax return they should use for a down payment. It may be hard to give a blanket answer because their may be a few variables here. First of all, do you have any very important bills that need to be paid? For example, it you mortgage two payments behind and about to be foreclosed upon? If this is the case you should strongly consider using whatever portion of your tax refund toward this that is needed to get you caught up again. If you don’t have anything like this and you still plan to buy a car, I would recommend using most if not all of your refund to use as a down payment on you next car. Of course it would be nice to get a new big screen t.v. but you need to set priorities here. Can a big screen t.v. get you to your job every day? Can a big screen t.v. bring you to the grocery store when you need to get supplies? You can always save up money later for some of those thing but consider this. If you have bad credit, that means you are not going to get the best interest rate. Since you are not going to get the best interest rate, you will pay higher amounts of interest over the period of the loan. If you have a large down payment, will pay less in finance charges because you will be paying interest on less money. If you have a $15,000 balance on a car and put $3,000 at 20% interest you will save almost $2000 dollars in interest charges and have payments that are only $318 a month instead of $397 a savings of $79 each month!

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