March, 2017 | ApproveNow

Top 20 FAQ About Your Bad Credit Auto Loan

Congratulations! Your bad credit rating didn’t stop you from getting approved for an auto loan.

Once the excitement of driving around in your own vehicle has died down, and it’s time to make the first payment on your bad credit auto loan you’ve probably discovered that you have a few questions.

It’s not uncommon for car buyers to have several questions and concerns about their high interest auto loan after the excitement of purchasing a vehicle has finally worn off. To help consumers find the answers they need regarding their bad credit car loan, we have put together a list of their most frequently asked questions.

20 Questions About Your Bad Credit Car Loan

When will the first monthly payment on the bad credit auto loan be due?

You have the option of choosing to make your first monthly payment 30 or 45 days from the date you took possession of the vehicle. If you already have several bills due at the same time each month it might be best to choose to make a payment every 45 days. The only downside is that the amount you owe each month will be slightly higher.

Your bad credit auto loan contract will also have the due date for the monthly payments listed for easy reference.

Will past and present monthly statements be made easily available?

You will be receiving your monthly bad credit auto loan statement either by post or email, making it easy to access your current information. Most lenders will also allow you to view your past and present statements online, once you have set up an account.

Regardless of whether you choose a “paper” or “paperless” account, you should also be saving copies of the monthly statements for your records.

Not only will this make it easier for you to calculate interest paid at tax time, it also allows you to keep an eye on your account.

Are there different options available for making payments?

While this will vary slightly, depending on the type of lender, most offer a variety of payment options. If the auto loan is through the Buy Here Pay Here lot you can usually make the payment in person at the finance office. This is a convenient way to ensure that the payment gets there in time so you can avoid late fees and dings to your credit history.

Other payments options typically include paying online, mailing in a check and some lending institutions even provide you with a toll free number to call.

Before you choose a payment option you do want to make sure that it doesn’t charge a fee.

Will I be able to get a copy of the amount of interest paid on the bad credit auto loan annually?

The amount of interest you pay each month on the auto loan is listed on the statements. You can also find a record of the amount of interest paid the previous year in your online account. Your lender should also send you a copy annually for your tax records.

Is there someone to contact with questions about the auto loan?

If there isn’t anyone to contact when you have questions about your bad credit auto loan, you might want to consider looking for a different lender. You should always be able to contact someone in the finance department during normal business hours, and some of the top rated subprime lenders are even available on weekends.

Will it be possible to pay off the bad credit auto loan early?

You can pay off a bad credit auto loan early, but there are some pros and cons associated with doing so. The upside is that there will be one less bill to pay monthly. Paying a loan off in full will also help raise your credit score, though it will take some time before it appears on your report.

The downside to paying off a bad credit auto loan early is that there won’t be a continuing record of timely monthly payments.

Showing that you can make loan payments on time is one of the best ways to raise your credit score. Some lenders might also charge an additional fee when an auto loan is repaid early.

Are there any penalties or fees associated with paying off the auto loan early?

The answer to this question will depend on the lender, and it is one that you will want to ask. Most brick and mortar financial institutions do not charge a fee or assess any penalties if you pay off your high interest auto loan early. Some online lenders and even a few less than reputable Buy Here Pay Here dealerships do charge a fee if you pay off the loan early and the amount can vary.

The best advice is to ask your lender before you consider paying off a bad credit auto loan early.

Can my loan be transferred to another lender?

Most lenders will not transfer an auto loan to another lender, especially if you have poor or bad credit. The majority of financial institutions simply do not want to assume the risk you represent.

Generally if you want to “get out” of a bad credit auto loan you will have to sell the vehicle and the new owner will have to apply for financing. Refinancing the auto loan through another lender is another option, but it might also entail fees and certain penalties.

If the auto loan is assumed will my payments stay the same?

Your monthly payments will not stay the same if the auto loan is transferred. If the vehicle is sold and you followed the proper steps, the new owner is now responsible for making the payments. This means that there is one less bill for you to pay every month.

If the auto loan was transferred due to refinancing, your monthly payments should be lower. This is one of the main reasons consumer choose to refinance their bad credit auto loans.

Will transferring my auto loan hurt my credit rating?

As long as the monthly payments are made on time, transferring your high interest auto loan won’t hurt your credit rating. In the long run, it could actually help it improve. The lower monthly payments that are typical of refinancing or transferring an auto loan are easy to make on time, and a steady record of this will result in a higher credit score.

Another bonus to transferring a bad credit auto is that it often comes with a lower interest rate.

How long will it take to receive the vehicle’s title once the auto loan is paid off?

The length of time it takes for you to receive the title to a vehicle once the auto loan is paid off will vary. If the title is being mailed to you it can take four to six weeks, but it rarely takes this long unless it is an out of state lender.

Some Buy Here Pay Here lots will allow you to pick up the notarized title in person as soon as the final payment is made, while others require a few days to finish the paperwork. It is also best to check with your lender to find out when the vehicle title will only be in your name.

When will the final loan payment show up on my credit report?

Final payments on auto and any other type of loan typically take 30 days to show up on your credit report. This is because the three major credit reporting agencies only update once a month. If the final payment on a bad credit auto loan has appeared on your credit report, and it has been over 60 days, it might be a good idea to speak with your lender to ensure that all of the paperwork has been properly submitted.

What happens if I can’t make a monthly payment?

If for anyone reason you can’t make a monthly payment or its going to be late, it is important to immediately contact the lender. In some cases the due date can be extended so the late payment doesn’t affect your credit report. The lender might also recommend refinancing as a way to lower the amount of your monthly payments.

The majority of lenders will work with you to ensure that you can keep your vehicle.

They would rather extend the length of the loan and receive lower monthly payments than have to take possession of your vehicle, which generally results in them losing money.

Will my information be sold by the lender?

This is an important question to ask, unless you don’t mind getting bombarded by advertisements. Most reputable lenders will not sell your private information, though you should be advised that some details will be available for the public to access. This is especially true whenever you purchase a “big ticket” item.

Your social security number and any other personal identifying information should be kept private, and in some cases it is illegal for any financial institution to sell it or make it public.

Will job loss affect my bad credit auto loan?

Job loss unfortunately can happen for any number of reasons, but it doesn’t always have to affect your bad credit auto loan. If you are fortunate enough to qualify for assistance during unemployment, making your monthly loan payments on time might not be a problem. If the loss of your job is making it difficult to keep up with the loan payments, it is important that you speaker with the lender immediately.

Letting the lender know ahead of time that you are having financial problems might make it possible for you to keep your vehicle, while you are looking for employment.

If I move do I have to let the lender know the new address?

Even if you are receiving your monthly statements via email and making payments online, it is still important to keep your lender apprised of any changes to your address. In most cases you can simply fill out short form online or even mail in your new address with your monthly payment.

Can I extend the length of the bad credit auto loan?

Auto loans can be extended, even if you have poor or bad credit. If you need to lower the amount of the monthly payments, you can speak to your lender about refinancing through them. You might also want to also consider refinancing through a different lending company. In some cases this can result in lower monthly payments, without the length of the auto loan increasing.

As long as the payments are continued to be made on time extending the length of the loan won’t have a negative effect on your credit.

Is it possible to have a co-signer removed from a “high risk” auto loan before it is paid off?

There are two ways that a co-signer can be removed from a bad credit auto loan, even if it is not paid off. You can ask your lender to remove the co-signer if you can show your income has increased enough to assure them that you can make the monthly payments by yourself.

You can also apply for refinancing through another lender without a co-signer. While this is often the easiest way to remove a co-signer from an auto loan, you could incur fees and penalties from your original lender.

Most financial experts recommend simply leaving the co-signer on the loan, and continuing to make the payments on time.

If my credit score improves before the auto loan is paid in full can I get a lower interest rate?

It’s not uncommon for consumers to notice that their credit score has improved after they have been making regular payments on their auto loan. When your credit score is high enough you might qualify for lower interest rates, and this could mean that it is time to refinance your auto loan.

Refinancing an auto loan after seeing an improvement in your credit score could translate into lower monthly payments, without increasing the length or amount of the loan.

How long after the auto loan is paid off do I have to wait until there is an improvement in my credit score?

According to Experian it usually only takes 30 days for you to see an improvement in your credit score, once the auto loan has been paid off. If you haven’t noticed a change after 90 days, it might be a good idea to request a free copy of your credit report. You are entitled to one free credit report each year from each of the three agencies.

If you have any additional questions about your bad credit auto loan you should speak with your lender as soon as possible. Not only will you get the answers you need, it can also prevent any confusion that could end up having a negative effect on your credit report.

Everything You Need To Know About Credit Repair Companies

If you have a bad credit score it could be costing you money.

You can expect to pay higher interest rates on auto and other loans. Your poor credit history will also make it difficult for you to secure almost any type of financing, and this can affect all aspects of your life.

Fortunately you don’t have to be stuck with a bad credit rating for the rest of your life. There are some things you can do to improve your credit score. One way is to contact a credit repair company, but there are some things you should know.

How Credit Repair Companies Started

Companies promising to fix your poor credit score are not new. They have been around since credit agencies first started reporting consumers’ scores and payment histories to potential lenders.

Over the last ten years credit repair companies have become more prominent, and it is almost impossible to avoid seeing one of their ads.

After the collapse of the housing market and subsequent economic crisis in 2008, many people found themselves with more debt than they could manage. Foreclosures, vehicle repossessions, late and missed payments all took a toll on consumers’ credit.

Now that the economy is recovering and people are starting to get back on their feet many are taking a look at their credit reports and scores. While a credit repair company can’t make correct negative information go away, they can help you fix errors that are lowering your score. This will not only make it easier for you to get approval for an auto or other type of loan, but it will also help you save money by avoiding high interest rates.

How Credit Repair Works

A study recently conducted by the Federal Trade Commission discovered that one out of five consumers had an error on their credit reports. Even one small error is enough to drop your credit score several points. This will affect everything from your ability to secure a loan to the amount of the down payment and interest rates.

It is classified as an “error” if it doesn’t meet the following three standards, according to the Federal Trade Commission.

Credit reports must be 100 percent accurate.

Reporting must be fair.

Data must be supported by facts.

If the information contained in all three of your credit reports does not meet the criteria, it is considered an error and steps should be taken to correct it immediately. While you can “do-it-yourself”, sometimes it is best to let a professional take care of repairing your credit.

Credit repair simply means correcting any errors found on your three reports. It is important to remember that only mistakes can be removed, and not negative information that is correct. When an error is identified the credit repair professional will help you find documentation that supports your claim, and work with the reporting agencies to have it removed from your report.

Some of the most common causes for errors to appear on a credit report include,

Bills a former spouse was responsible for under the divorce decree.

Identity theft resulting in fraudulent accounts.

Mistakes made by one or more party responsible for gathering and reporting various credit data. (credit card companies, lenders, debt collectors, etc.)

Once the credit repair company has filed a dispute, it should only take 30 to 45 days to see an improvement in your score.

The reason for this relatively short timeline is to help ensure you don’t have to wait to get the line of credit you need.

What To Look for in a Credit Repair Company

If you believe that there is an error on your credit report, it might be time to contact a professional. While you can dispute errors by yourself, sometimes it is worth it to get help from an expert. They have the time and resources to devote to your problem, and know the specific documentation needed to support your claim.

There are thousands of credit repair companies and professionals to choose from, and not all are the same.

Unfortunately some credit repair “experts” are less than reputable and choosing the wrong one can leave you with the same problems, while still costing you money in fees.

While flashy advertisements promising instant results might get your attention, it shouldn’t be the deciding factor when you are choosing a credit repair company. Some of the things you will want to look for to ensure that you are getting the best service include,

The credit repair company should be aware of your rights, and explain each one to you in complete detail. This should be done before any contracts or agreements are signed. The credit repair specialist should also be able to answer all of your questions to your satisfaction.

It is important that the credit repair company takes the time to understand why you are disputing an item on your credit report. If they aren’t willing to listen to your story, chances are they won’t be able to effectively resolve your problem. You want the credit repair company to make sure that information in the reports meets the required criteria for it not to be considered an error. Otherwise hiring them will be a waste of your time and money.

A top rated credit repair company will be able to clearly explain exactly the type of services they can perform for you. Before you sign the agreement you should know exactly what you are getting, and the type of results you can expect.

If a credit repair company can’t provide and guarantee these three simple things, then you will want to find someone that can.

How To Avoid Credit Repair Scams

With all of the importance that is placed on a credit report, it’s not surprising that there are plenty of scams promising to fix any negative data for one low fee. This is only one of the common credit repair scams, and it is unfortunately easy to fall for any of them.

Some of the common signs that often indicate a credit repair company or expert might not be reputable typically include,

Guaranteeing to erase bad credit information permanently.

Promising to boost your low credit score to a “fair” or “good” rating.

Stating that they can provide same day results.

Promising to erase all bad credit scores from a FICO report.

Even though you have probably seen these and similar ads on billboards, television and other media outlets these are promises that credit repair companies simply cannot keep, and usually indicate that they are only trying to take your money.

No one, including credit repair companies, can remove any information from your report as long as it is accurate.

It is illegal for these companies to use the strategies they are advertising, and in most cases it is also impossible.

According to the Federal Trade Commission there are a few factors that often indicate a credit repair company is dishonest, and knowing what to look for will save you time and money. Some of the things to be cautious of when you are looking for help in repairing bad credit include,

The Credit Repair Organizations Act states that a company or individual cannot charge you until the promised services are completed. This means that you should never be charged upfront.

You are not informed of your rights before signing a contract, along with the steps you are able to take to correct an error for free. You can petition the credit bureaus to remove any mistakes, but in some cases it does help to have the experience of an expert.

If the credit repair company advises you not to contact the three major credit reporting services, it is probably a scam. If you do not have all three of your credit reports, it is impossible to accurately tell if there are any errors.

Since accurate and current negative information on your credit report cannot be legally removed, and company that promises to do so is one that shouldn’t be trusted.

If you are advised to dispute all of the information in your credit reports, regardless of accuracy, it is best if you seek help from a more trustworthy source.

Some credit repair companies will even suggest that you apply for an Employer Identification Number. Using this, instead of your social security number will generate a “new” credit identity and report with a higher score. Not only is this dishonest, it can also be illegal.

Cost of Repairing a Credit Report

The cost of repairing your credit report will vary depending on a few factors. Where you live and the type of services you need all play a role in the cost, along with the company. Fees will vary, and it is important to get everything in writing before you sign any contract.

It is important to note that the Credit Repair Organizations Act makes it illegal for these companies or even a solo professional to charge you before they have completed the job. If a credit repair company ever demands payment before starting work, you will want to report them to the Federal Trade Commission and find someone more reputable.

You should be aware that if you follow illegal advice, you can also be held liable.

It is illegal under federal law to misrepresent your Social Security number, supply false information on a loan application or apply for an Employer ID number in an effort to receive a new credit report. This is true even if you were advised by a credit repair company.

Are Credit Repair Companies Really Necessary?

When it comes to deciding if a credit repair company is really necessary, this will depend on your unique situation. In some cases you can probably dispute an error on your credit report by yourself, but other times you might need some expert help.

If you find that you do need a credit repair company you want to make sure that it is reputable.

The last thing you want is to find yourself in legal trouble, along with being out the required fees. Take your time and make sure that you ask the right questions, and you’ll find a credit repair company that can resolve your problems quickly and legally.

The Complete Guide: How To Improve Your Credit Score

Your below average credit score is not only making it difficult for you to secure a low interest auto loan, it is also affecting your ability to purchase other “big ticket” items.

If you are tired of your bad credit score affecting your ability to purchase anything from a vehicle to a home, there are some steps you can take to start improving your rating. It will take time, in some cases several years, but with hard work and consistency you slowly start improving your poor or bad credit score.

3 Things You Can Do Now

There are several steps that you can take to start improving your subpar credit score, and there are three that you can do now.

Review your credit report.

The most important thing is to check your credit report. If you don’t know what your score is and why it is so low, you won’t know how to start repairing it. Errors can also occur in a credit report, and this is another reason why it is important to check it regularly.

Your credit report will show all of the information used to calculate your score. This includes data on any missed or late payments, which will cause your credit score to drop. If any mistakes are found on your report it is important to deal with it immediately by contacting the credit bureau.

Sometimes all it takes to improve your credit score is to remove an error from your report.

You are entitled to one free credit report every 12 months from each of the three credit reporting agencies. Most financial experts recommend requesting a copy of your credit report from a different agency every four months to ensure you are well informed.

Make payments on time.

Late and missed payments are the most common reasons credit scores start falling. Setting up reminders when payments are due is one easy and convenient way to ensure it always gets sent in on time. Some financial institutions offer the option for automatic payments. The money is automatically deducted from your account on a preset date so you don’t have to worry about it. The only downside to this convenient option is that only the minimum payment is withdrawn each time so you don’t always have a chance to pay off a high interest auto or other loan in a shorter amount of time.

Lower amount of debt.

It might not be easy, but lowering your amount of debt is a great way to start improving your credit score. It will also help you get a handle on your spending. Financial experts recommend paying off your credit cards with the highest interest rates first, while continuing to make the minimum monthly payments on your other loans.

Once the high interest credit cards are paid off the money can be put aside for a down payment, which can go a long ways towards lowering the interest rates next time you apply for a bad credit auto loan.

Since you will still be making payments on the lower interest cards, your credit report will still continue to show a positive history.

Tips On Improving Your Credit Score

There are a few other things you can also do to start improving your credit score. The following tips are easy to implement, and if you use them consistently you’ll soon be able to qualify for auto loans with a lower interest rate.

Pay attention to credit card balances

The amount of revolving credit you have will affect your score, and smaller is always better. To help boost your rating pay off your balances and try to keep them low.

Financial experts recommend keeping a smaller amount of revolving credit, typically around 30 percent or lower.

You also want to make sure that your monthly payments are the ones being reported to the credit bureau and not your balance. This will cause the amount of your revolving credit to be higher than the usage, and this will have a negative effect on your score.

Get rid of “nuisance” balances

“Nuisance” balances are usually small and occur when you use several cards, instead of just sticking with one. While making monthly payments on time will help your credit rating, having too many can have the opposite effect.

Equifax and the other major credit reporting agencies recommend paying off most of your cards, and only using one or two with the lowest interest rate.

This way you are still able to make the purchases you need, without cluttering up your credit report.

Another advantage to only using one or two credit cards is that there are fewer payments to remember to make each month.

Don’t get rid of all old debt

It is actually good to have old debt appear on your credit report, even though many consumers try to have it removed. While missed and late payments, bankruptcies and repossessions all have a negative impact on your credit score, old debt that is paid off has a positive effect. It shows that you successfully paid a loan off, and potential lenders view this as a sign that you might qualify as a low risk borrower.

This usually translates into an easier approval process when you are applying for an auto loan, along with lower interest rates.

How to Keep Your Credit Score from Falling

It doesn’t matter if your credit score is considered excellent or poor, you don’t want it to fall. The biggest reason a credit score drops are due to missed or late payments, but there are other factors that can contribute to a loss in points. Knowing what these are will help you keep your credit score improving, instead of having to watch it fall.

It is important to re-establish your credit history if your score is below average. One of the best ways is to open a new account and pay it off on time. Even though it will take a while to show up on your credit history it will prevent your score from falling, and eventually help it increase.

You do want to check your credit score at least once a year, and some financial experts recommend doing so more often. As long as you request a copy of your credit report from one of the three major credit reporting agencies, Experian, Equifax and TransUnion, it will not affect your score.

Refrain from opening several lines of credit in an attempt to maintain or improve a bad credit rating. Not only will this appear to potential lenders that you might be a high risk, it can also lower your score. Opening several credit accounts at the same time can cause some lenders to question your ability to make all of the various payments on time. It also makes it harder for you to keep track of when all of the monthly payments are due, and missing even one can cause your credit score to plummet.

It is important to remember that just because you closed an account it isn’t automatically removed from your credit report. In some cases it can stay in your history for up to seven years, according to Experian. If you made all of the payments on time it should have a positive effect on your score, otherwise you’ll have to wait for it to be removed by the credit reporting agencies.

It is Possible to Improve a Bad Credit Score

If you have a bad credit score and want to apply for an auto or other type of loan there are steps you can take to eventually avoid high interest rates. It starts with monitoring your credit report, and becoming financially responsible.

While you can’t “fix” your credit score, only correct errors, maintaining a consistent history of timely payments will help get it above the subprime rate.

This way the next time you are shopping for a “big ticket” item like a vehicle you aren’t stuck with a high interest bad credit auto loan. If your score has improved enough you might not even need a large down payment.

The Complete Guide To Refinancing Bad Credit Auto Loans

Just because you have a low credit score it doesn’t mean that you can’t refinance your auto loan.

While it is always best to improve your credit rating before thinking about refinancing there are times when it might be to your advantage to consider this option. Before you start filling out stacks of paperwork and get ready to wait through the occasionally long loan approval process there are a few things you should about refinancing bad credit auto loans. This complete guide will ensure that you are fully informed before you sit down with a loan officer.

When is it a Good Time to Refinance a Bad Credit Auto Loan?

There are several situations where it might make sense financially to refinance a bad credit auto loan. Knowing when can increase your chances for approval, and this is always beneficial when you are dealing with a bad credit score.

Improvement in credit history. Your poor credit history resulted in an extremely high interest rate when you purchased your vehicle. In the last 12 months if you have made every payment on time, you should start seeing an improvement in your credit score. Once the payments start showing up in your credit history, it might qualify you for a lower interest rate. This will lower the monthly payments, while saving you money over the duration of the loan.
Interests have dropped. Interest rates can drop after you’ve signed a bad credit auto loan. Shifts in the economic climate, regulatory changes and increased marketplace competition are some of the reasons you might see a drop in interest rates. Refinancing can help you take advantage of the lower rates which can translate into lower payments and shorter loan duration.
Your interest rate was increased by the dealership. Unfortunately some buy here pay here car lots are less than honest. Sometimes if the bad credit auto loan is through the dealership, you will be told that you only qualify for a high interest rate. It is easy to fall for this scam if you don’t know your credit score, and this is also why it is important to be well informed before you sign any loan agreement. If this has happened to you refinancing might be able to secure you a lower interest rate on your bad credit auto loan.
Monthly payments are too high. This is the most common reason people with poor credit consider refinancing their high interest auto loan. Even though refinancing at this point typically doesn’t lower the interest rate, if approved it will lower your monthly payments. The downside is that it will increase the length of the loan. If you can’t make the monthly payments and handle your other financial obligations then refinancing will help you keep the vehicle, and rebuild your credit.

What are the Cons of Refinancing a Bad Credit Auto Loan?

Even though there are several good reasons you might want to refinance your high interest bad credit auto loan, you should also be aware of the cons. If you are reapplying for a new loan within 12 months of purchasing the vehicle it could lower your credit score for a couple of years. According to the major credit reporting agencies your score could drop by as much as 5 points if you refinance too early.

Other reasons why refinancing your bad credit auto loan might not be a financially smart decision include,

A vehicle that was purchased new is now considered used, and the total cost of the refinanced loan may be more than the car’s resale value.
Refinanced loans might come with smaller payments, but the length is usually extended. This means that you are actually paying more for the loan instead of saving money.
If the vehicle is over 5 years old it might not be eligible for refinancing. Most lending institutions won’t consider refinancing a loan on a vehicle that typically comes with higher mileage and an increased risk for mechanical problems. If the mileage is less than 100,000 miles some banks and credit unions might consider approving the refinancing loan application.
It is important to check your credit score before applying for refinancing. If your score has dropped you will probably end up paying higher interest rates, and this could even mean higher monthly payments. However if your credit score has improve it might be a good time to refinance your high interest auto loan.
Some bad credit car loans come with penalties if they are payed off early. The penalty is put in place to ensure lending institutions still make some money off of the loan. Banks, credit unions and other lenders make the majority of their profits off of the interest they charge, and they lose money when it is paid off early. In some cases it can be more than the remaining balance due on the loan.

What About Credit Score?

While your credit score is extremely important when you are refinancing your high interest auto loan, if it is still less than perfect you can still be approved. The different types of lending institutions have varying requirements, and while you may have a low credit score you may still meet some of their other qualifications.

One requirement that all lenders have is that you must have a record of making the previous loan payments on time.

If you were frequently late or have missed payments, your chances of qualifying for a refinanced auto loan are significantly decreased.

Along with your credit history and score some of the other items lenders look at when considering refinancing approval include,

If you owe more on the current loan than the vehicle’s resale value.
The age of the vehicle.
If the vehicle’s mileage is over 100,000 miles.

Unfortunately if any of these apply to your vehicle and you have poor or bad credit you will find it difficult to refinance your auto loan.

How to Refinance a Bad Credit Car Loan

If you’ve decided that now is the best time for you to refinance a bad credit auto loan there are a few steps you need to take. The first one is to call your lender if the reason you’re seeking refinancing is due to an inability to make the monthly payments.

In some cases they might be willing to give you a short extension so the late payment doesn’t show up on your credit report. Your lender might also be able to handle the refinancing for you.

Before you sign any refinancing auto loan, even one from your current lender, it is always advisable to “shop around” to make sure you are getting the best interest rate and loan terms. Some options to consider include,

Online lending institutions
Brick and mortar banks
Credit Unions
Peer-to-Peer lending groups

Peer to Peer (P2P) lending groups often approve refinancing auto loan applications that traditional financial institutions deem too risky. Since these loans are through individual people it is important to do your research before signing any loan agreement. If they are not represented by a reputable group or marketing partner you could find that the majority of the monthly payment is going towards interest and not the loan.

Once you have decided on a lender you are going to need the following information,

Your Information

You will need to bring proof of your social security number and present address. If you have been at your current residence for less than 2 years you will also need to bring proof of your former address.
Past and present employment information, including address, phone number and owner/manager’s name.
Proof of earnings. W-2s, pay stubs and filed tax returns will all be acceptable.
The name of the current lending institution your bad credit car loan is with, along with the account number.
The current balance of the loan and payment amount. You should also know the amount if it is immediately paid off since this can differ.

Vehicle Information

Make, model and year of the vehicle
Mileage
Vehicle Identification Number (VIN)

You should also have a current copy of your credit report or at the very least know your score. Once you have all of this information together you are ready to sit down and start filling out the forms.

Cash Back Auto Loan Refinancing

One advantage to refinancing an auto loan, regardless of your credit, is that you get to skip a payment without incurring any penalties.

This frees up some extra money that can be used for other things.

The reason that you might get to miss a monthly loan payment during refinancing is that it will take time for the paperwork to move through all of the necessary departments once it has been approved and signed. In some cases the first payment of the refinanced car loan might not be due for 60 days from the date of signing the agreement. This also is a common reason many people consider refinancing their bad credit auto loan.

Get Bad Credit Auto Loan Refinancing Even If…

It is important for people with poor and bad credit to realize that even though they’ve made financial mistakes in the past, it doesn’t have to mean that they are stuck paying higher interest rates.

If they meet the criteria that many lenders require they often find that their bad credit didn’t prevent them from being approved.

Some of the misconceptions people have that might be preventing them from seeing if refinancing their bad credit auto loan is the right choice for them include,

Previous bankruptcy or one that is still open
Record of a vehicle repossession
Self- employed
Currently receiving disability pay
Have lower than average income
Little or no credit history

Even though any of these will lower your chances of being approved for refinancing, and your choice of lenders might be limited, it might still be worth it to apply. The worst that could happen is that you will be turned down and stuck with the original loan agreement.

Refinancing Might Make Sense

If you need to lower your monthly payments or you think that you qualify for lower interest rates it might make financial sense to refinance a bad credit auto loan. Before you make any changes carefully consider your options, along with the pros and cons. If you still feel like it is the best decision for your situation then it is time to start getting your paperwork in order and shopping around for the best refinanced bad credit auto loan.

How To Avoid Bad Credit Auto Loan Scams

In September of 2016 the Federal Trade Commission (FTC) officially charged several buy here pay here dealerships with using deceptive sales and financing practices that were unfair to the consumer. While the majority of bad credit auto dealers are fair and reputable, this is unfortunately not true for all of them. In order to protect themselves from unscrupulous buy here pay here dealerships consumers with credit problems need to be aware of the common auto financing scams.

Why You’re At Risk For A Bad Credit Auto Loan Scam

Unfortunately the fact that your credit is less than perfect is putting you at risk for an auto loan scam. Having bad or no credit will classify you as a “high risk” borrower and this means higher interest rates when you are approved for a loan. Finding a lending institution willing to approve you for a car loan is also putting you at risk for being taken in by an auto loan scam.

Not only are your borrowing options limited, after being turned down by other lending companies you are more likely to accept the first offer of approval.

Sometimes bad credit borrowers will sign the contract without even reading the conditions of the loan agreement, and this does include the fine print.

Common Auto Loan Scams for People with Bad Credit

After finally finding an affordable vehicle that meets your specifications and finagling with the salesman, you have made it to the financing office. While you might think that this is a positive thing, and in most cases it is, at a few buy here pay here lots this is when you really have to be paying attention. Almost all of the auto loan scams occur in the financing office. Here are some of the more common ones that you need to look out for.

Spot delivery scam

Also known as the “financing fell through” scam this one occurs when you are told that you qualified for a low interest rate and are handed the keys after you’ve signed on the dotted line. A few weeks later you are contacted by the dealership and told that your financing fell through, and there are two ways the situation can be resolved.

You can return the vehicle to the buy here pay here lot.

Sign another loan application with a significantly higher interest rate.

Unfortunately since you have signed the contract these are your only two options. In the fine print you will see a phrase stating that the terms of the loan agreement are subject to approval. You were never actually told that you were approved for the low interest car loan, only that you pre-qualified for a lower APR. Unfortunately the reason this scam is so common is that once the buyer has driven the vehicle off the lot they are more likely to make the higher monthly payments than return it and start all over again.

Lie about the borrower’s credit score scam

This scam usually only happens to borrowers that have a credit score right on the cusp of being below subpar. Your credit score not only determines your likelihood of being approved, but also your interest rate. When the financing department at the buy here pay here lot tells you that your credit score is lower than it actually is they can charge you higher interest rates. Unless you know your actual credit score you will never know that you are being scammed.

Forgot to pay off the trade-in scam

Being able to trade-in your old vehicle can reduce the down payment required for loan approval. In some cases it can even eliminate the down payment all together. While this is good news for prospective car buyers with bad credit that are also short on cash, you should be aware that this could also be a scam.

Some less than reputable buy here pay here car dealers promise to pay off the remaining amount owed on your trade-in, and this is when you need to be careful. Unless you have actually signed a contract that specifically states that the dealership is responsible for paying off the remaining balanced owed on the trade-in, you will soon find that you owe on two vehicles. Even if the dealership has your old vehicle, the original lender of the loan will still hold you responsible. Not only is this detrimental to your credit when you start missing loan payments, you could also end up with legal troubles. The best way to avoid this scam is to never use a vehicle you still owe on as a trade-in.

Straw purchase scam

This scam is surprisingly easy to fall for, especially if you have bad credit and have been repeatedly turned down for an auto loan. It also tends to happen more often when interest rates are high and fewer people are qualifying for car loans. The scam occurs when the dealership knows that you won’t be able to make the payments on your reported income, and pushes you to get a co-signer. Since the payments are higher than you are able to make, the loan becomes the responsibility of the co-signer. If they want to keep their credit scores above subpar the loan payments will be made on time.

Not only is this scam illegal, it is responsible for ruining friendships and destroying close family bonds.

Customer’s online lender bounces checks scam

Potential car buyers with poor credit are often finding that their chances of being approved is a little better when they go through an online lender. In some cases the interest rates can even be lower than those found at a traditional brick and mortar lender. When you are approved for a bad credit auto loan through an online lending company you will be issued a blank check with your ARP rate to present to the dealership. This is when the scam starts.

The majority of buy here pay here lots are more than happy to accept the check, but there are some that will insist that you have to purchase the vehicle with a loan through their financing company. The most common reason given is that the online lender is known for bouncing checks, and this is simply a lie. If any financing institution is issuing bad checks there will be public records of a federal indictment. The reason that these dealerships try to pull this scam is simple greed. They make more money when you accept financing through them. If this every happens simple leave the auto dealership and find one that is reputable.

Forced warranty scam

There are two ways this scam can occur, and both will end up costing you a lot of money.

When you are signing the loan agreement papers you are suddenly told that you won’t be approved unless you purchase an extended warranty. Financing institutions will never require someone to purchase additional items for approval, it increases their risk of losing money on the loan due to a borrower’s inability to make the higher payments. All states do require proof of insurance before a vehicle is driven off of the lot. This is the borrower’s responsibility and up to their discretion on which company they use.

The other way this scam can occur is when the warranty is added into the loan agreement without the borrower’s permission. Once the contract is signed you are stuck with the higher payments for insurance that you don’t want or need. This is just one more reason why it is important to always read the fine print.

Excess fees – dealer’s prep scam

This is another example of dishonest buy here pay here car dealerships trying to make extra money off of their unknowing customers. There are no fees associated with the dealer preparing or filing your paperwork, and this means that you should not be paying any extra charges. In most cases the excess fees are hidden in the loan agreement, which is why it is important to always read every line of the contract.

Cars sold “as is” scam

Most buy here pay here lots would never consider using this scam, but there are a few that will do almost anything to sell a vehicle. Purchasing a vehicle “as is” might seem like an affordable option, especially if you have bad credit but in most cases it ends up being an expensive mistake.

When a vehicle is listed “as is” it means that the dealership is not responsible for any problems that might need repairs. These vehicles do not come with any type of guarantee or warranty, and it really is a case of “buyer beware”. The majority of these vehicles have been in accidents or even flooded, and this means that you really aren’t getting a good deal for your money. The easiest way to avoid this scam is to never purchase a vehicle that doesn’t come with a warranty.

Come back and resign to lower your payments scam

It is hard not to fall for this scam, even if you are aware of the red flags. Being told that your payments are being lowered is hard to ignore, especially if it is because they’ve always been on time. Since this is true, it makes this seem less like a scam. It is even easier to fall for the scam when you actually see your lower payment schedule on paper.

You might be making lower monthly payments after resigning, but the length of the loan also increased.

In most cases this means that you are now paying more for your vehicle. The best way to avoid this scam is to remember that lending companies are always trying to make a profit, and will never offer you a “better deal” that would result in them losing money.

A Few Tips On Avoiding Bad Credit Auto Loan Scams

If you do have subpar credit there are a few things you can do to help protect yourself from buy here pay here auto loan scams.

Avoid short term 72 or 84 month auto loans. While paying off your car quickly might sound appealing, you will be paying significantly higher interest on the loan. In some cases the interest rate has been as high as 21 percent, and this can make it difficult for some borrowers to make the monthly payments.
Before you start shopping for cars or apply for an auto loan it is important to know your credit score. This will dramatically reduce your risk for being taken in by a dishonest car salesman. See what the average interest rate is for an auto loan in your city is with your credit score. This way you will know before you sign a contract whether or not you are getting a fair interest rate.
It is important to read and understand every line on an auto loan contract, especially the fine print. Skipping over the agreement is one of the main reasons buyers get caught in an auto loan scam. Don’t be afraid to ask plenty of questions, and if the dealership can’t answer them then the loan might be a scam. It is always a good idea to have copies of the contract before driving off of the car lot in your new vehicle.
Never rely on any verbal promise made at a buy here pay here lot, regardless of who makes it. A verbal agreement is not binding by law, and this alone is reason enough to always get everything in writing.
One of the easiest ways to get caught in an auto loan scam is to drive the vehicle off the lot before financing is approved. Even though it might be difficult to wait a few more days to take possession of your new vehicle, in the long run you will be glad that you did. It is also important to never sign any contract before financing approval, regardless of what the car dealership says.

There Are Good Bad Credit Auto Loans

Even though there are a few dishonest buy here pay here car dealerships, the majority are fair and reputable. Proving this point a BHPH auto lot in Texas recently ran an ad for a “$700 Lemon”. In the ad everything that was wrong with the vehicle was listed, ensuring potential buyers knew exactly what they were in for.

While the majority of BHPH car dealerships won’t try to scam you, it is still a good idea to be aware of the common ones so you can protect yourself and your credit.