The first thing that comes to mind is how can there be such a thing as any credit used car financing. The answer is that there is a huge demand and need for automobiles and if you cut out all the buyers that have less than perfect credit you would greatly reduce the consumption of vehicles and hamper the growth of the economy. So in order to fill that need there is a little known part of the auto retailing business that sells and finances vehicles for buyers that have credit that most lenders would turn away.
The dealers that offer any credit used car financing are usually called Buy Here Pay Here (BHPH) dealers or car lots. The buy here pay here terminology is no secret, in fact it is quite simple. You buy at the dealer and you make your payments at the same dealer. In short the dealership or car lot is not only the retailer of a used vehicle, buy they also act as the bank or lender. These establishments only offer used or pre-owned vehicles for sale rather new ones as a way of reducing their risk.
Car Financing Options for Any Credit Status
You may have noticed advertising that says bad credit or every credit qualifies for financing at certain dealers which is actually in house financing offered at buy here pay here car dealerships. These are the dealers that have any credit used car finance options. They are not bound by the underwriting or regulations that most auto lenders use to determine if a borrower is a good risk or not. They decide right there in the showroom in they are going to approve for an auto loan. The methods they use to decide if they will finance your choice of vehicle is based on income, time on your job, and length of time at your address. One of their favorites sayings are “If you have a job you are approved”.
This rather unconventional method of providing financing for used cars has been growing steadily for a number of reasons, from the economy to a higher rate of bankruptcies being filed. The main thing is that people that have terrible credit can still get a vehicle. If these people were unable to get a dependable vehicle they would have a problems keeping and finding a job, providing for their family and taking care of the everyday business of life. So there really is a need for any credit vehicle financing.
Somewhere between having great credit and extremely bad credit there are people that have credit that may not qualify for the conventional auto loan from an auto maker’s lending unit, but they can qualify with what is called sub-prime lenders. These lenders specialize in providing auto loans for the person with marginal credit that needs to buy a car. They use the buyer’s credit score to determine eligibility along with income and length of employment. However they also have certain stipulations for the auto loans they approve. These stipulations can limit the dollar amount of the loan, the term on the installment contract, the age and mileage of the vehicle and the amount of down payment that the buyer must have before the final approval is made.
These sub-prime lenders don’t have used car financing for bad credit, but they charge less interest on their loans than the buy here pay here car dealership does or at least in most cases. As you can see there really is a solution for any credit used car financing the only difference is where or with whom the transaction is made.
Every single individual would like to have the smell of a new car in their motor room. There are people who can buy the brand new cars according to their desire and there are some people those who are not able to fulfill their dreams. It is their poor financial status which prevents them from buying a car. If you are among them then not to worry with financing option available in market. You can get a financing for a used car from private seller at affordable payments.
Traditionally, people used to purchase a car from the leading auto dealers where the borrower where forced to accept the rates offer by the dealer on car loan. Moreover, there were strict norms to be followed while obtaining such loans. Usually, people with low credit scores were denied on such loans or offered higher interest rate. When you run dry on your cash, the immediate thought is to borrow it from your friend or neighbor. Private party car loans also know as person to person or third party car loans work exactly in the same way wherein you can purchase a car from your friend or neighbor and a private party car loan lender finances you for the purchase.
The norms and conditions are not that tough when it comes to obtaining a private seller used car loan. Usually, the rate of interest will be high due to the risk involved as compared to normal car loans. One has to understand that the private party car loan lenders make their money on the back end of the successful deals. It is important to check for the specifications before you sign the deal. A few things which one has to ensure is the proper transfer of title and the market value of the car you are going to purchase before entering into the agreement.
The borrowers can fix their loan period according to their financial status. They have the extra advantage of extending the loan tenure without any hassle. Make sure that you have your credit report safe to save some amount of money. Having a credit report that is in best shape will attract all the private party auto loan lenders to offer the loan at a lower interest rate without demanding much. A simple search in the internet will make the process easier and forms can be submitted online to these sellers. Usually the response time will not exceed 72 hours and you can happily walk away with the check if you meet the minimum eligibility criteria.
Most of the lenders set the loan tenure to be a maximum of 48 months and not more than that. It is important to stick to the repayment schedule. A larger down payment will reduce your burden and the rate of interest rate. This will substantially reduce the loan tenure by which you pay fewer amounts on the interest rates. Hence, it is always a good practice to be financially disciplines while opting for a deal from a private seller.
Purchase of car requires a meticulous and detailed plan and does not start with choosing a car and test driving it. You will have to be informative not only about the features of the car but also on the various methods to finance the car. Most people are short on cash reserves and rely heavily on car loans.
You can avail the used auto loan from every major car dealer form you area. It is actually simple to find, but you will have to be careful before you apply for any of such loan program. You can research before you apply for the car loan. You can go through the following steps to ensure that you land up with the best loan offer available for the right car.
Financial condition: You will have to ascertain the exact financial condition prevailing. To do this you will have to know the amount you earn, spend and save every month. This will give you an idea on the extra amount you can afford to spend without turning yourself into defaults. You will have to be comfortable with the budget you have. In case you end up with a loan whose monthly payments are higher than your affordable capacity, then it will be devastating. You will not be able to pay your payments in time and this will get reflected by the drop in your credit rating.
Calculations: When you are calculating the affordable monthly payments for a car loan, there are numerous factors that come into consideration. One of them is rate of interest. It keeps varying from place to place and depending upon the credit history of the customer and overall financial condition. For example, if you have good credit scores, or if you have a co-signer or collateral, then the rate of interest is likely to be low. The interest rates tumble down also if you can pay a high amount as down payment. Similarly, the rate is interest charged by the dealers is generally high if you have low credit scores and low income. It is so because lending to you will be considered to involve higher risk factor. It is same for the people who have filed for bankruptcy.
Additional costs: When you are considering buying a car, you will have to keep it in mind that cost of the car is not the only cost involved. There will be other costs too such as licensing fees, administration costs, taxes, etc. these tend to vary depending upon the state you live in. Apart from this there will be the cost of upgrades, repairs and maintenance. You will have to add up all these costs to come at the total cost.
Lender: While offering a car loan the lender considers not only your financial stability as a measure to approve the loan, but also the condition of the car. Some auto lenders will ask for model number, vehicle identification number (VIN), year of manufacture of the car. The general rule is that if the vehicle is older, then the rate of interest is higher and the repayment period is shorter.
Without having the cash to purchase your used car, you may want to finance one with great rates and terms. Purchasing a new car may be a stretch for some people today. Buying a used car is a smart way to go if you have limited income.
When looking for a used car you will need to take some things into consideration. For example, the older the car is you may encounter some problems with constant repairs that can be very costly.
When looking to finance a used car, figure out what type of vehicle you need, such as a car, SUV,truck or a mini van. Ask yourself how long you will be keeping the car and what will you be using it for. Before signing any loan agreement make sure you understand all the fine print, such as interest rate, early pay-off penalties, etc.
After you decide what type of vehicle you want and you know how long you plan to keep it, you can start looking at the options you have for financing. Don’t just look at one lender do some comparison shopping.
To save the most money, paying for your car outright would be ideal. But lets come down to reality, most people cannot pay cash for a car. While looking for financing, consider putting a down payment on your car. This way you won’t have to finance so much for your car. If you finance your car and the taxes that go along with it will end up costing you more money in interest.
The less you borrow, the less you pay in the end. Shorter loan terms are a good way to save you extra interest charges. Loan terms 72-84 are not a good option to follow. It does not benefit you, just the lender. Longer term loans can cause you trouble as your car depreciates faster than you are paying it off. You will owe more for the car than it is worth.
Do not sign any documents that state you will have a pre-payment penalty if you pay your car off early. It may cost you a lot of money. The reason is that majority of loans are paid off before they mature, and its the lender that makes the profit.
There are options out there when it comes time for you to finance your vehicle. Do some shopping around and find the loan that fits your personal needs.