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Bankruptcy? Repossession? How to Get a Car Loan with Poor Credit
While having bad credit does not make it impossible to obtain a loan, you can expect to pay higher rates on home loans, vehicles loans, credit cards, and so forth. Each year, millions of people file bankruptcy. Furthermore, many lenders are forced to repossess automobiles because of non-payment. If you fall into this category, there are still ways to get approved for a new car loan.
Rebuild Credit Before Applying for Car Loan
Several creditors are willing to give loans to people one day following a bankruptcy. Of course, these loans do not come with the best financing package. Because the applicant is considered a high risk, lenders are likely to charge huge fees. This way, if the applicant defaults on the automobile loan, the lender has an opportunity to re-coup some of their money.
Before applying for a car loan, endeavor to rebuild your credit. Financial experts recommend that you obtain three to four new credit accounts. As a high risk applicant, lenders will be reluctant. Thus, you may have to obtain a secured credit card with a high percentage. If you pay off the balance on credit cards monthly, you will not be subjected to huge fees. Moreover, this is the easiest and quickest way to re-establish credit.
Wait 1 2 Years Before Applying for Auto Loan
After you have opened new credit accounts, periodically monitor your credit report. If you continue to pay bills on time, you will establish a good payment history with your new creditors. This will reflect on your credit report. Once you have been making regular payments on new accounts, try applying for a car loan. Lenders will notice your improved credit history, and may offer a financing package with better rates.
Apply for Loan with High Risk Lenders
Another method for obtaining a loan with poor credit is applying with a high risk lender. Commonly referred to as sub prime lenders, high risk lenders specialize in loan packages for individuals with poor credit.
The downside is that most sub prime auto loans carry a huge interest rate. Typical car rates for good credit are about 5%. Bad credit applicants can expect to pay a few percentage points higher. On the other hand, if you do obtain an auto loan with a high percentage, you can always refinance the loan for a lower rate when your credit score improves.
Here are our recommended Auto Finance Companies online.
Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.
More Useful Resource and Updates on information on car loans with bad credit
- BoB, Maruti sign MoU for car finance (Business Standard India)
Bank of Baroda (BoB) and Maruti Suzuki India, have signed a Memorandum of Understanding (MoU) whereby dealers of Maruti cars would apprise prospective Maruti car-buyers about the car-loan advantages of the bank and help them in applying for it.
- Nissan Motor to Sell $500 Million in Auto Loan Bonds (Update1) (Bloomberg)
Dec. 1 (Bloomberg) -- Nissan Motor Co. ?s finance unit plans to raise $500 million in the first sale of auto-loan bonds in the U.S. since the Federal Reserve agreed to support the market.
- Dealers prefer easier approvals to cheaper loans (Business Times (Malaysia))
PROTON car dealers say they prefer easier loan approvals rather than cheaper loans to help drive sales. "The cheaper loan should not be at the expense of an easier loan approval.
- Small Players Vie for ?Green Car? Loans (New York Times)
Detroit?s automakers are focused this week on convincing Congress to provide them $25 billion in federal aid. But there is another $25 billion auto industry loan program, set up by the Department of Energy to quicken the development of fuel-efficient cars, The New York Times?s Leslie Wayne reported.
- Small Players Vie for ?Green Car? Loans (New York Times)
Automakers are trying to convince Congress to provide aid, but there is another $25 billion auto industry government loan program, for the development of fuel-efficient cars.
- Nissan Motor Sells $600 Million in Auto Loan Bonds (Update3) (Bloomberg)
Dec. 2 (Bloomberg) -- Nissan Motor Co. ?s finance unit raised $600 million selling asset-backed securities in the first sign of demand for auto loans since U.S. Treasury Secretary Henry Paulson unveiled a plan last month to support consumer debt.
- Local lenders see jump in car loan defaults (Baltimore Examiner)
Pay the mortgage, buy food, keep the lights on. For Americans hit hardest by the economic crisis and facing an impossible choice of which bills to pay, these come before car payments, ratcheting up rates of defaults on auto loans.
- Nissan Motor to Sell $500 Million in Auto Loan Bonds (Update2) (Bloomberg)
Dec. 1 (Bloomberg) -- Nissan Motor Co. ?s finance unit plans to raise $500 million in the first sale of U.S. auto-loan bonds since U.S. Treasury Secretary Henry Paulson said the government would shift the focus of his financial-industry rescue package toward bolstering investment in consumer debt.
- Big Three car giants plead Congress for rescue (AFP via Yahoo! News)
Chastened bosses of the Big Three US automakers beseeched Congress for a 34 billion dollar bailout Thursday, steering into a raging debate about the wisdom of rescuing the crippled firms.
- US car union tightens belt to save industry (Australian Broadcasting Corporation)
The main car workers' union in the United States says it is willing to give up a number of key benefits to help the three biggest car makers get emergency funding from the Government.
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