May, 2017 | ApproveNow

Have Bad Credit? You Can Still Get A Balloon Payment Auto Loan

If you have bad credit you might think that a balloon payment auto loan is out of reach, but this might not be necessarily true.

It is possible to secure a balloon payment auto loan, even if your credit is less than perfect.

Before you sign any auto loan contracts it is important to know exactly what a balloon payment is to ensure that you are making the right decision for your finances.

What is a Balloon Payment Auto Loan?

A balloon auto loan can be a good option for potential car buyers looking to keep monthly payments low. It is structured to allow for low payments until the end of the term when one large amount will be due. Since the interest has been “front-loaded” you are typically paying the principle.

Balloon auto loans are usually designed for car buyers that need to keep their monthly payments low, but plan on having the substantial amount due at the end.

These slightly risky car loans can also help if you don’t have the money readily available for the down payment.

Before you start looking for a balloon auto loan it is important to start planning financially. If you don’t have the amount due on the auto loan at the end of the term, the vehicle could be repossessed. Buying back the vehicle will be more expensive than with a traditional auto loan since you still have to pay the principle owed.

Balloon Auto Loan Risks

There are several reasons why balloon auto loans can be financially risky, and often not the best choice for everyone. Some concerns you should address before agreeing to any auto loan terms include,

Will you be able to save enough for the large payment due at the end of the term, typically in three to five years.
Are you willing to risk the negative effect a vehicle repossession can have on your credit score if you can’t make the final balloon loan payment?
Refinancing is not always an option with a balloon payment auto loan since the amount owed will typically be more than the vehicle is worth.

Balloon Auto Loan Benefits

While there are risks associated with balloon auto loans, there are also a few benefits. If you are positive that you will be able to make the large payment due at the end, it could be the best way to get a new vehicle.

A balloon auto loan can give you the additional time you need to save money for the large end of term payment.
It allows for the “sale option”. Meaning that the vehicle can be legally sold and the money from the sale used to pay off the loan. This can help prevent the auto loan from “turning upside down”.
The chances of repossession are often less since the monthly loan payments are lower, though this can change at the end of the term.
Leaves the borrower with additional cash since a down payment is typically not required with a balloon auto loan.

Balloon Auto Loan Requirements

Most lenders require two things to be approved for a balloon auto loan.

You must be able to show proof of income to reassure lenders that you will be able to make the low monthly, and large balloon payment at the end of the loan.
A good FICO score and solid credit history are also typically required if you want to be approved for a balloon auto loan.

However, if you have a poor credit score it is still possible for you to get an auto loan with a balloon payment.

How to Get a Balloon Auto Loan with Bad Credit

Your poor credit score will make it more difficult for you to be approved for any type of financing, including a balloon auto loan.

There are a few things you can do that might improve the chances of your auto loan application being approved.

Some of the same tips that can improve your chances of being approved for a traditional auto loan can also be used when you are applying for one with a balloon payment at the end.

Even though a down payment often isn’t required with a balloon auto loan, applying one can significantly improve your chances of approval if you have bad credit.
Having a co-signer can reassure potential lenders that the bad credit auto loan will be repaid on time.
If a stock is about to mature or you are schedule to receive any other influx of cash, showing proof of the expected amount can improve your chances of approval for a bad credit auto loan with a balloon payment.

Buy Here Pay Here car lots are more apt to approve auto loans for applicants with bad credit than traditional lenders, and this is something that you should consider when you are shopping for the best offer.

Comparing Balloon Auto Loans

It is important to remember that all balloon payment auto loans are not necessarily the same, regardless of your credit score. This is especially true if your FICO score is below subpar. Before you agree to any auto loan terms, you want to “shop around” to ensure that you are getting the best deal financially.

Here are a few of the aspects you’ll want to compare.

What is the “end” number?

Do not sign any balloon loan agreement without looking at the final number. This is the amount you’ll owe when the last auto loan payment is due. One of the worst financial mistakes you can make is to not know how much is due at the end of the term.

Know the monthly payment amount.

Your credit score will affect the amount of the monthly payments. If it is subpar or lower, expect to make higher payments each month. By comparing balloon auto loans from traditional lenders and Buy Here Pay Here dealerships, it is possible to find one with affordable monthly payments.

It should be noted that the monthly payments also determine the amount owed at the end of the loan.

Look for an auto loan with low interest rates.

Obviously, you want a balloon payment auto loan with low interest rates. This will depend on your credit score and if you are applying a down payment. Having a down payment, even with a balloon auto loan can lower interest rates and the amount owed each month.

Since the interest rates can change over time, it is always a good idea to discuss this with a licensed financial expert.

Is a Balloon Payment Auto Loan Right for You?

A balloon payment auto loan can be beneficial, but there are also several risks.

Only you know your financial situation, and if you’ll be able to make the large final payment at the end. Not doing so, will have a disastrous effect on your credit score.

If you are positive that you will be able to meet the terms of the agreement a balloon auto loan might be the best option, even if you have bad credit. Just remember to compare terms and rates with different lenders, before you sign any auto loan contract.

How To Keep Your Bad Credit Auto Loan Payments Low

If you think that your bad credit score makes it impossible to get approved for an auto loan with low monthly payments, you couldn’t be more wrong.

While it is true that your poor FICO score will make it more difficult, it can be accomplished. There are certain strategies you can employ that will dramatically improve your chances of being approved for a bad credit auto loan with a low APR.

Tips on Keeping Monthly Auto Loan Payments Low

The interest rate directly affects the amount of the monthly payments, and you want it to be as low as possible. Since your credit history is less than perfect, Buy Here Pay Here dealerships are more inclined to offer financing at a high interest rate. This usually translates into higher monthly payments that might be avoidable if you follow these tips.

Don’t rush into signing an auto loan agreement.

One common financial mistake car buyers often make is rushing to purchase a new vehicle.

Just because you think your credit score deserves a low interest rate, doesn’t mean that you will get it.

In your rush you could overlook a few key details, and this could result in higher monthly payments.

Before you start shopping for the best interest rates on a bad credit auto loan, you will want to check your FICO score and history. It is not uncommon for mistakes to appear on a credit report, and these errors will affect the interest rate you get on the car loan. In some cases, the black mark can be the reason your loan request is denied.

It is also important to watch out for advertised low APR rates. These low interest rates are typically reserved for the dealerships “well-qualified” customers with a credit score 700 or above. If you sign the agreement and do not meet the criteria for the low interest rate, you’ll quickly find that your monthly payments are higher than anticipated.

Pay down balances on credit cards.

If you have a poor FICO score and credit utilization rate over 30 percent, your chances of being approved for an auto loan are slim, even if it comes with a high interest rate.

Potential lenders are often nervous approving car loans when the applicant has a subpar credit score, and a large amount of debt on their charge cards.

You will be viewed as a “high risk” borrower, and if you are approved the bad credit car loan will come with costly monthly payments. Paying down the balances on your charge cards will not only lower credit utilization, it can also boost your FICO score. It will take a couple of months for the payments and lower balances to appear on your credit report, but it will be worth it when you are approved for an auto loan with low interest rates.

Pay off credit card debt with under-performing stocks.

Financial experts cannot stress enough the importance of paying off your high interest card credits. Not only are the high interest rates draining any extra cash, they are making it virtually impossible for you to pay off the existing debt.

Since credit utilization makes up 30 percent of your FICO score, it is important that you get your debt ratio down.

Most potential car buyers do not have the extra funds to pay off their credit cards, and produce the often required down payment. This is when you might want to consider selling off any stock that is under performing. The money that you make from the sale can be applied to your credit card debt. This not only lowers your credit utilization to debt ratio, but also shows potential lenders that you can repay a loan.

The record of payments and balances paid off will also give your credit score a slight nudge. For some potential car buyers, it can be enough of a boost to ensure low monthly payments with the auto loan.

Apply for online financing.

Many consumers are taking advantage of a new option when they are applying for an auto loan. Instead of traditional banks, credit unions and Buy Here Pay Here dealerships, potential car buyers are applying for online financing.

The main reason for the growing popularity of online financing is due to how easy it is.

Once you have your information, you fill out the simple online application. The information required online is basically the same as that needed by the dealership. You will need to provide personal information, along with any regarding your finances.

You typically receive an answer from an online lender within a few minutes, and the terms of the loan agreement are clearly written. Online lenders are often able to offer lower monthly payments and interest rates due to their lack of overhead. Some online lenders are also more forgiving when it comes to poor credit scores.

Once you have been approved, the check is typically deposited in your account or held until you are ready to use it at the dealership. Since you already have financing you are ready to drive your new car off the lot, as soon as you pick it out.

Refinance an existing auto loan.

If you have been making your monthly auto loan payments on time and your credit score has improved, it might be time to refinance your car loan. Often this results in lower monthly payments and interest rates.

Not everyone will be approved for refinancing, and the hard check on your credit can hurt your score.

If there are any late payments or if you have held the auto loan for less than 12 months, refinancing probably won’t be a viable option for you.

The best advice is to check your payment history and speak to a qualified financial expert.

Consider automatic monthly payments.

Simply allowing the lender to automatically deduct the monthly loan payments from your bank account can reduce interest rates by .05 percent.

Not only does this ensure that you won’t miss a monthly payment, it also eliminates the need for paper statements. Some Buy Here Pay Here dealerships offer additional savings to entice customers to allow them to automatically deduct the monthly payments.

If you are worried that there won’t be a tangible record of your payments, you can access your account online and print any documents you need.

Apply a larger down payment.

Larger down payments always equal lower interest rates since you are borrowing less. This is especially important when you are trying to keep your bad credit auto loan payments low.

Automobiles depreciate quickly in value, and if the initial loan amount is too high you could find that you owe more than the vehicle is worth.

To avoid being caught in an upside down auto loan, you want to be able to put down at least 20 percent.

If you don’t have the necessary down payment you might still be approved for a bad credit auto loan, but it will come with high monthly payments. Unless a new vehicle is an absolute necessity, it is usually best to wait to sign any bad credit auto loan agreement until you have the down payment.

The Final Word

With the right financial planning, along with some patience, you can get and keep the monthly payments on your bad credit auto loan low.

It can also give you a chance to improve your credit score. The most important tip to remember is to “shop around” and always look for the auto loan with the best interest rate.

Can’t Pay Off A Bad Credit Auto Loan? You Have Options

Sometimes it is just impossible to keep up with your auto loan payments.

Financial setbacks can happen making it harder to meet your monthly loan requirements. While simply ignoring the problem until the vehicle is repossessed is an option, there are other ways you can get out of a bad credit auto loan without ruining your Fico score.

Equity in the Vehicle or Upside Down on the Auto Loan?

The first thing you want to do if you can no longer make the payments on your auto loan is to determine if there is equity in the car.

This simply means that the vehicle is worth more than the amount owned on the auto loan. If you owe more on than the vehicle is worth it is referred to as an “upside down auto loan’, and commonly occurs with older model cars.

If you have equity in the vehicle there are several ways you can legally get out of a bad credit auto loan without damaging your Fico score. If you are holding an upside down auto loan, it might make better financial sense to try and repay the lender.

How to Get Out of a Bad Credit Auto Loan

When you simply can’t afford to make the monthly payments on your auto loan, you do have options. Some of them will allow you to keep the vehicle, while others will require you to sign it over. The right one for you will depend on your unique financial situation.

Modify the existing auto loan.

If you are on good terms with your lender, and have a record of making the monthly payments on time, it might be possible to modify your auto loan. It is important to remember that this option will not work for everyone, especially if they already have a low credit score.

Some of the modifications your lender might offer can include,

Temporary suspension of monthly loan payments. (typically no longer than 60 days, and they will be added onto the end of the loan)
Lower monthly payments for a brief period of time.
Offer to refinance at a lower interest rate. This could also result in a month of two of no loan payments while the bank is finishing the paperwork.

In order to take advantage of any loan modifications your lender might offer, it is vital that you speak with them as soon as you know that you are going to have difficulty making the payments.

If you wait until the bank contacts you, your chances of being approved for any loan modifications are significantly decreased.

Trade-in the vehicle

Living without a dependable vehicle isn’t an option for some people, and if this applies to you trading it in might be the best choice for you. Not only do you get to choose a “new” vehicle, it often comes with lower interest rates.

You also want the asking price to be lower so it will be reflected in the monthly auto loan payments. Otherwise you’ll soon find that you can’t afford your new vehicle.

To ensure that you get the best value for your trade-in you’ll want to check its Blue Book value.

Let someone take over your auto loan

This typically only applies if you have an auto loan with a low interest rate, unless you have an extremely sympathetic friend or family member. If so, you might still get to keep the vehicle.

Typically, when you let someone assume responsibility for your auto loan you are also signing the vehicle over to them. If this seems like the best option for your financial situation, you will need approval from your lender. You cannot sign the vehicle title over to them, and expect the loan to follow.

The person assuming the auto loan will need to be approved by your lender, and the terms of their agreement might be different than yours. All parties will need to sign certain documents before the loan is officially out of your name. You will want to verify that your name has been replaced on the loan and vehicle title before leaving your lender’s office.

Sell your vehicle

Another option when you are having trouble making your monthly loan payments is to sell the vehicle yourself.

The goal is to sell it for an amount higher enough to pay off your existing bad credit auto loan so you can apply for one at a lower interest rate.

This option often takes time, and it can be a risky way to get out of a poor credit auto loan.

Turn the vehicle’s keys in

Known as “voluntary repossession”, sometimes this is the only option if you want to protect your credit score.

Before you walk into the car dealership and hand them the vehicle’s keys, it is important to check the laws in your state.

Some allow the lender to still hold your responsible for the remaining balance of the loan, even though the vehicle has been turned in.

You will want to speak with your lender before choosing this option to ensure that it is the best one for you.

Allow the vehicle to be repossessed

If you absolutely cannot go without a vehicle and there are no other options, you might just have to wait for it to be repossessed. This will have a detrimental effect on your credit that can last for up to seven years. During this time it will be difficult for you to secure another vehicle loan, along with any other type of credit.

It should also be noted that the cost of having the vehicle repossessed could be added to the total amount owed on the loan, effectively increasing the amount of your accumulated debt.

Most Lenders are Willing to Help

The good news is that most lending institutions are willing to work with their customers if they find that they can’t make their monthly loan payments. This is due to the simple fact that they don’t want to take repossession of the vehicle once it has been sold. In the long run, it costs lenders and Buy Here Pay Here lots more money to resell the vehicle than it would to work with the existing loan holder.

Just remember that it is important to let your lender know immediately if there is a sudden change in your finances.

Most will work with you so you can keep your vehicle, and get out of a bad credit auto loan.

The Complete Guide To Debt Consolidation

Even though the economy is improving, millions of Americans are still in debt.

This can have a negative impact on their credit score making it difficult for them to secure any type of financing.

One way people are looking to repair their bad credit rating and raise their score is to consolidate their debt. It is one viable option to consider if you are looking for a way to start paying off your accumulated debt.

What is Debt Consolidation?

Debt consolidation is when you combine several unsecured loans into a single monthly bill. Some examples of unsecured debt include,

Medical bills
Credit cards
Personal loans (i.e. school)
Payday advances/loans

One of the main advantages in combining your debt is that it can reduce your chances of forgetting a payment. Instead of keeping track of several monthly bill due dates, now there is only one. Missed and late payments on loans is one of the leading causes for poor credit scores.

There are three types of debt consolidation consumers generally consider.

Debt Management Plans
Debt Consolidation Loans
Debt Settlement Agreements

It is important to remember that debt consolidation is not an instant fix.

You will not see an immediate improvement in your credit score. However, after you’ve made several payments on time it can be an effective first step in repairing your bad credit score.

Some of the other benefits that often come with consolidating unsecured debt can include,

Lower interest rates
Repair poor credit scores
Lower monthly loan payments
Reduce the amount of time you’re in debt

Debt Management Plans vs Debt Consolidation Loans

When you are trying to decide what is the best way to consolidate debt, you’ll want to figure out how much you owe. If you owe less than $3000 in credit card debt, your best credit repair option might be to apply for a new charge account with a lower or no interest rate.

Simply transferring the balance can dramatically reduce monthly payments, along with the amount of time you’re in debt.

You can also borrow against your retirement savings or life insurance plan if your overall debt is less than $3000. If you owe more than $3000 in credit card debt, your best course of action might be a debt management plan.

Debt Management Plan

Debt management plans (DMP) are often recommended by financial experts. The most effective ones are usually managed by a non-profit organization, and start with a credit counseling session.

Once your monthly payment amount has been decided the credit counseling will work with your creditors to,

Lower interest rates
Remove or reduce late/missed payment fees

In some cases, a credit counselor can even reduce the total amount of the debt.

Each month you send one payment to the credit counseling agency monitoring your debt management plan. They will divide the amount among your creditors, eliminating all the harassing phone calls and collection letters.

The downside to a debt management plan is that it can temporarily lower your credit score. Once the debt has been repaid, typically in 3 to 5 years, you should see an almost immediate improvement in your credit score.

Debt Consolidation Loans

If you don’t want your credit score to drop any lower, you might want to consider a debt consolidation loan (DCL).

The main drawback is that this method won’t shorten the length of repayment time, but it will let you make one monthly payment.

Instead of sending several smaller payments to different creditors, you will simply make a single larger one. A debt consolidation loan will also come with a lower interest rate. Some of the types of DCLs you might want to consider can include,

Personal loans
Home equity loans
Balance transferred to zero or low interest credit cards
Student loan consolidation

Understanding Bill Consolidation

Bill consolidation is simply combining your bills and using a loan to pay them off. This way your credit report will reflect the positive settlement of several debts, along with your ability to effectively manage the new loan payments.

This is an extremely effective way to boost your credit score, though you will have to go through the loan approval process.

If your credit score is already below subpar, this might not be the best option for consolidating your debt.

Tips on Getting a Consolidation Loan

The first step is to add the total of the bills you are trying to consolidate. This includes the amount of the monthly payments, along with the interest rates. You will also want to know your current credit score before you start looking for a consolidation loan.

Some of the best places to apply for a debt consolidation loan will include,

Banks
Credit Unions
Online lending companies

Many financial experts recommend starting with an online lender. Your chances of being approved for a loan are increased, and many offer lower interest rates. Before you accept any consolidation loan offer you will want to compare the following among the various lenders.

Interest rates
Any fees or penalties for early loan repayment
Length of the loan

When you are taking out a consolidation loan it should not only shorten the amount of time you are in debt, but also lower your monthly payments and interest rates. If it doesn’t accomplish all three, you will want to keep looking at the various lenders.

Consolidating Credit Card Debt

If your credit score is above 700, financial experts typically recommend applying for a zero-interest account.

Your “good” FICO score should allow you to qualify for a no-interest credit card, and you can use this to pay off your higher interest debt.

While this can be an effective way to eliminate your credit card debt yourself, there are a few drawbacks you’ll want to consider.

The introductory no interest rate typically only lasts 6 to 18 months. During this period 100 percent of your monthly payments will be applied towards your balance.
Interest rates on the remaining balance can jump as high as 27 percent, though they typically remain around 13 percent.
A “balance” transfer fee can be applied.
Some credit cards come with annual “maintenance” fees.

You can avoid many of these downfalls simply by “shopping around” for the best credit card offer.

How to Consolidate Bills

You will need to be patient and organized when you are consolidating your bills. In some cases, you might also have to be persistent when you are trying to figure out the total amount of your debt.

After you have the total amount of debt owed, it is time to decide how much you can afford to pay each month.

Once you have settled on these numbers, it will be easier to decide whether a debt management plan, debt settlement or personal loan is the right financial choice for you.

Regardless of the type of debt consolidation method you choose, it is always important to remember that it will not be an instant fix for your poor credit score.

When NOT to Consolidate Debt

Even though consolidating your debt does come with several advantages, it is not always the right choice for everyone. There are times when it could increase your debt, and have a detrimental effect on your credit score.

If the debt is transferred to a zero-balance credit card, but you don’t change your spending habits you can easily find the total amount you owe steadily increasing.
Debt consolidation can cause your credit score to drop making it difficult for you to secure a home or even high interest auto loan. If you are planning on applying for one of these loans, you might want to wait to consolidate your debt.
If you use your home or vehicle as collateral for a debt consolidation, you could be at risk for repossession or foreclosure if the monthly loan payments aren’t made in full.

Taking the time to get all your paperwork in order and knowing exactly what you can afford to pay each month are the first steps in ensuring that a debt consolidation loan is the right choice for your financial situation.

If you need advice on how to change your spending habits, you will want to speak to a qualified debt counselor.

Consolidate Debt in 3 Simple Steps

If you’ve decided that debt consolidation is the best way to repair a poor credit score, there are three simple steps you need to follow.

Take the first step.

The first step is to decide to start paying off your debts, and repairing your bad credit. The sooner you start working on a strategy to repay your debt, the quicker it will go away. This also means seeing a faster improvement in your credit score.

Know what your options are.

If you don’t know what your options are, it will be impossible for you to make the right decision for your situation. A debt management plan should be your first option, unless you have a “good” credit rating or owe less than $3000. In these cases, a personal loan or transferring the balances might work best for you.

It is also important that you know which type of debt can be consolidated. For example, you cannot consolidate federal student loans with the rest of your debt.

Be aware of the risks.

Financial advisors might not always fully inform you of all the risks associated with debt consolidation. The first one being, that it is not always the best choice for everyone. Using a home or automobile as collateral is risky, along with putting up retirement savings.

Before you choose any debt consolidation option, you should be well-aware of any potential risks.

Simply following these 3 steps will help prevent you from making a potential mistake that could end up hurting your credit score. Before you make any final decisions, it is always best to speak with a qualified financial advisor.

Do You Belong To The Credit Community?

If you want to start repairing your bad credit score there is an important question you need to ask yourself. Do you belong to the “credit community”? Even if you have a credit score and history, this doesn’t necessarily mean that you are a part of the community.

To successfully repair your poor credit score you must be able to work within the community, and this means being an active part of it.

Credit Community: Who Doesn’t Belong?

Most adults are members of the credit community, except for two types of consumers.

If you are one of the few adults that doesn’t have a credit history, you are probably finding it difficult to start building one. In order to build a positive history there must be credit for you to use, but it is hard to get approved when you don’t have any for potential lenders to look at. Without a previous history of making loan payments on time, most lenders won’t approve you for a credit card or loan. Since you can’t get approval there won’t be any credit for you to use, and this means that you won’t be able to start repairing your dismal FICO score. It is a frustrating Catch-22 that can be difficult to get out of.

People that have previously experienced bad luck with their credit aren’t always a part of this community. Due to their mismanagement of their credit cards and bank accounts, they have now decided to strictly use cash. Even though this is not the norm in today’s society, it is still possible to exist without ever needing to use a credit card or take out a loan.

While this will eventually result in the black marks disappearing from your report, you also won’t have any credit to build on.

Basically, you will be starting from the beginning and this means it might be more difficult to raise a low credit score.

Credit Communities in the U.S.

The Federal Reserve Bank of New York conducted a study in 2015 that found an estimated 89.2 percent of American adults currently have a credit score and history. This means that they are a part of a credit community.

New Hampshire estimates that 96.4 percent of its population has a credit history, while Arizona only boasts 84.7 percent of its residents with a working credit score. The differing numbers reflect the finances of the region, with stronger economies typically resulting in a higher number of residents with useable credit histories. If the economy continues to grow, the New York Fed also expects to see participation increase in a credit community.

Rebuilding Your Credit Score

Simply being a member of a credit community doesn’t automatically mean that you will be approved for a loan, but it can increase your chances if you are actively using your accounts.

This is important to remember if you are trying to repair your credit score. Your credit score is determined by measuring a few metrics that include the age and types of accounts, along with any new credit you might have.

There are 3 other factors that comprise your FICO score, and determine how active you are in the credit community.

Credit utilization ratio

While you don’t want your credit utilization ratio to be too high, not using it at all can be just as damaging. It comprises 30 percent of your score, and most financial advisors recommend only using around 10 percent annually.

If you used more than 10 percent you are not alone.

According to the New York Fed the average American uses 38 percent of their available credit, and this is lowering their FICO score.

You can still be a member of the community, and use less credit. This ensures that potential lenders have a strong current history to review, while also demonstrating your ability to manage your finances.

Revolving credit

This refers to credit cards and home equity lines of credit, and your ability to obtain it without having to apply for another loan.

While the New York Fed estimated in 2015 that 70 percent of American adults had access to revolving credit, the numbers weren’t the same across the county.

Residents living in northern states typically have higher levels of revolving credit due to a stronger economy. This doesn’t mean that if you live in the southern part of the country you won’t have access to revolving credit, but it might be more difficult if you have a low FICO score. By making the monthly payments and managing your accounts, over time your participation in the credit community can help raise your score and make it easier for you to access credit without having to apply for a loan.

Paying on time

Since 35 percent of your credit score is comprised of your payment history, it is easy to see why it is so important to never miss a due date.

According to data accumulated by the New York Fed an estimated 78 percent of Americans are current with their loan obligations.

Not only does this indicate a strong credit community, but also consumers’ ability to keep up with their loan payments.

Just by making your loan payments on time can raise your credit score a few points, and help build a positive history that can increase your chances of being approved for an auto loan or mortgage.

Using Credit Has Its Advantages

There are not any fees, dues or other extra costs associated with being a member of a credit community. All you have to do to join is to occasionally use credit instead of cash when you make a purchase or pay a bill. Even if you hold several credit cards, if you don’t use them you still aren’t a part of the community.

In order for it to have a positive effect on your FICO score, you must use your available credit and pay the balance off on time.

While it is important for you to be responsible with your credit, if it is used correctly it does have advantages. It can help raise your score, build a strong history and significantly improve your chances of being approved for a loan with a low interest rate the next time you need to apply.

If you have any questions about your participation in a credit community and how it can help you rebuild your history and FICO score, it is always advisable to speak with a qualified financial officer.

Can’t Access Your Online Credit Report? We Can Help

You shouldn’t have any problems accessing your free credit report online, unless a security alert is triggered. When this occurs, you will experience some difficulties.

Even though TransUnion reports that 95 percent of consumers have no problems seeing their credit reports online, there will be times when it’s not that easy for everyone. If you are having trouble viewing your credit report from any of the three reporting agencies, the following tips will guide you through the necessary steps.

How to Access Your Online Credit Report

You are entitled to one free copy of your credit history from each of the 3 credit reporting bureaus, Experian, Equifax and TransUnion every 12 months.

Each one will also allow you to request access to your credit report online.

Before you are allowed access to your credit report you will need to be able to supply the following information,

Name
Social Security Number
Date of Birth
Addresses within the last 2 years

Along with this information you will also need to answer several security questions.

These questions are based on “out of pocket” information, and are used to authenticate your identity. This means that the answers to the questions won’t be readily available to potential identity thieves.

If you are unable to answer any of the security questions correctly, your request to see your credit report will be denied.

Some of the other reasons you might not be able to access your credit report can include,

If you provide an address not listed with the credit bureaus.
Using a middle name that is not listed on your credit accounts.
If your financial history is limited.
If your credit accounts have been inactive for 6 months or longer.

If you can’t access your credit report online, you can still request a copy of it by mail.

How to Request a Credit Report by Mail

Requesting your credit report by mail will require you to provide the following information,

Copy of driver’s license or government issued i.d. with current address and photo.
Copy of a current utility bill, insurance or bank statement with matching address.
Social Security number
Date of birth
List of current and previous residences within the last 2 years.

Once the credit reporting bureaus have received and verified your information, a copy of your file will be mailed to you. The time it takes to receive your credit report will vary, usually four to six weeks.

If you are still having problems accessing your credit report, you simply might not have one.

Experian deletes inactive accounts with bad credit scores after 7 years. Accounts with good credit scores will be deleted after 10 years of inactivity. Once your credit history is deleted by the 3 reporting agencies it will be necessary for you to start building it again.

Requesting a Credit Report During Incarceration

If you or a family member are incarcerated, it is still possible to request a free credit report. The request must be done by mail, and the following information will need to be supplied.

Full name, including middle and any suffix.
Date of birth.
Social Security number.
List of residences within the last 2 years.

A notarized letter from a prison official verifying the current address will also need to be submitted. The letter must include the prisoner’s identification number, and be printed on the institution’s official letterhead.

If the request is being made due to suspected identity fraud, this should also be indicated in the letter.

Once the request has been received and approved, a copy of the credit report will be mailed to the correctional facility.

Locating the Necessary Information

Most of the documents and information needed to access your credit report will be relatively easy for you to provide. However, some might be a little more difficult.

If you need a copy of your social security number, you have two options.

You can request a new social security card by mail. You will need to provide your birth date, along with a copy of your state or government issued i.d. In most cases, it will take 4 to 6 weeks for your new card to arrive.
A request can be made in person at a local Social Security Administration office. You will need to show proof of identity, along with your birth date. A temporary card will typically be provided, and this can be used to access your credit report. Your permanent card usually arrives by mail within 4 to 6 weeks.

Other information that may be required to answer the security questions can include data on previous loans and credit accounts. This information is used to verify your identity, and is considered “out of pocket”.

You are not alone if you do not save copies of all your financial records. If some of the necessary information is missing, you can contact your bank or lender. In some cases, you might be able to pick the documents up in person so you can have almost immediate access your credit report. Otherwise you will have to wait until they arrive in the mail.

When Should You Pay for Your Credit Report?

One of the first signs of a potential scam involving your credit score or report is if you are asked to pay a fee.

You are legally entitled to one free copy of your credit report from each of the 3 bureaus, once a year.

Most experts recommend requesting the reports separately. This allows you to keep an eye on your credit history for free throughout the year. If a second report is requested a fee of $12 will be charged from the credit reporting bureau.

There are circumstances when you are entitled to additional copies of your credit report for free.

Information in your credit history might be inaccurate due to suspected fraud.
If you are the victim of extended fraud, you can request 2 free copies of your credit report annually.
You are planning on applying for employment 60 days or less from the date of the initial request.
Credit or loan application denied due to your poor or thin history. You have the legal right to request a free copy of your credit report from the agency listed in the denial notice within 60 days of receiving it.

Some states also have laws in place that allow residents to request multiple free copies of their credit reports.

One important tip to remember is to avoid websites offering to provide you with free credit reports.

Often you will find that you were billed at a later date for services that you could have done yourself.

Once you have your information is in order you can send your request to

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Requests can also be submitted to AnnualCreditReport.com.

If you have any additional questions or are concerned about identity fraud a financial expert should be contacted immediately.

Your Credit Score And Auto Loan Interest Rates

If you want to get the best interest rates on an auto loan, most industry experts recommend having a good or excellent credit score, a down payment and minimal debt.

While this will improve your chances of approval, it still doesn’t tell you how your credit score affects auto loan interest rates. Your credit score is relative, and not all lenders view it the same way. This means that even if your credit score is subpar, you can still be approved for an auto loan. To ensure that you also get the best interest rate possible, you need to understand how it is affected by your credit score.

Keeping Up with Your Credit Score

There are several types of credit scores for each of the 3 credit reporting agencies. These range from your FICO score to proprietary ones from Experian, Equifax and TransUnion.

Car dealerships will typically look at your “auto-enhanced” credit score, which shows how you’ve handled previous vehicle financing.

This information is included in your complete credit report, and is also used to compile your FICO score. Buy Here Pay Here lots and other car dealerships will pay close attention to,

Any missed or past due payments on previous bad credit auto loans.
Vehicle repossessions.
Bankruptcy was declared on an auto loan.

If any of these items are listed in your credit report, even if your FICO score is above subpar your auto loan might still come with higher interest rates.

What’s in a Credit Report

It’s important for you to know what your current credit score is, before you start shopping around for auto loans with the best interest rates.

The Fair Credit Reporting Act entitles you to one free copy of your credit file annually, from each of the 3 reporting agencies.

The formulas for calculating your credit score will vary, which is why it is important to keep up with all 3 of your credit reports. A low score on one report can affect the interest rate offered with the auto loan. Your credit score is determined by the following,

35 percent: your payment history.
30 percent: amount of debt owed.
15 percent: length of time accounts have been active.
10 percent: number of new lines of credit opened.
10 percent: type of different credit accounts.

Knowing what your credit score is before you start applying for auto loans will give you the opportunity to repair problem areas or dispute any errors, and this can result in lower interest rates.

Higher Credit Scores Equal Lower Auto Loan Interest Rates

If you do have a good or excellent credit score you should expect to be offered a low interest auto loan. This is because potential lenders will see you as less of a risk. Your high credit score indicates that you can manage your finances, and are more likely to repay the auto loan in full and on time. The low interest rate on the car loan is your reward for having a good credit score.

When you are looking at your 3 credit reports you might notice that your scores vary slightly, and this is due to the different formulas used by the reporting agencies. In most instances the variations are minor, and your scores will be close enough to be considered in the same range.

A tier system is used to determine what range your credit score falls in, and typically the higher it is the lower the interest rate on an auto loan.

750 and higher: Excellent
700 – 749: Good
650-699: Fair
550-649: Poor
550 and lower: Bad

The economy, where you live and who you are applying for financing with will also factor into determining the auto loan interest rate. Typically, you should expect an interest rate (APR) less than 3.5 percent if you have excellent credit. If your credit is bad the interest rate on the auto loan could be as high as 15 percent.

Industry experts do recommend avoiding car loans with 18 percent or higher interest rates.

The high interest rates often result in you paying more than the vehicle is worth, which results in an “upside-down” auto loan.

How to Lower Auto Loan Interest Rates with Bad Credit

Just because your credit is less than perfect, this doesn’t necessarily mean that you are stuck with a high interest auto loan. There are a few things that you can do to lower the interest rate. One of the most important is to take a copy of your current credit score with you to the Buy Here Pay Here dealership. This lets the financing officer know that you are aware of your credit score and the interest rates it generally garners.

Vehicle age

A vehicle’s age will play a role in the interest rate. Older vehicles might come with a lower sticker price, but you will also be paying a significantly higher interest rate. This is true even if you have good or excellent credit.

Older models usually depreciate in value and this makes many potential lenders view used vehicles as high risk auto loans.

This can decrease your chances for loan approval, especially if you have poor credit. If you are approved, the auto loan often has a high interest rate.

If you cannot secure financing for a new vehicle with your subpar credit score, you should consider applying for a used car auto loan. This might also help you qualify for lower interest rates, though you do want to avoid financing a vehicle older than 5 years.

Income to debt ratio

Your income compared to the amount of debt you owe can raise or lower auto loan interest rates. Potential lenders will take this into account when they are reviewing your auto loan application. Lenders use this to estimate your ability to make the monthly payments on time.

Being able to definitively show that your income exceeds the amount owed each month can improve your chances of being approved for a low interest auto loan, even with a poor credit score.

To calculate your income to debt ratio simply total all monthly bills and divide it by gross monthly salary.

Length of the loan

Auto loans can vary in length, and the longer the term the higher the interest rate. The term refers to the amount of time you have to pay off the loan typically,

36 months
46 months
60 months

If the term is longer than 5 years, you typically end up paying back more than the vehicle is worth. This is due to the high interest rates that come with long term auto loans.

Even if you have bad or no credit, if you can afford larger payments on a short term auto loan it is possible to get low interest rates.

Down payment

The size of the down payment does matter, especially if you want to get a low interest rate on an auto loan.

A large down payment can even result in lower interest rates on a bad credit auto loan.

The reason the size of the down payment matters is that it affects how potential lenders see you. If you only have a small down payment, you are often seen as more of a risk. This is true whether you have an excellent or poor credit score. A larger down payment is seen as less of a risk, and this might help you qualify for lower interest rates.

The Final Word

Your poor credit doesn’t have to mean that you are stuck paying higher interest rates every time you apply for a car loan. It’s also important to note that excellent FICO scores don’t automatically guarantee low interest rates. Potential lenders consider several aspects of your financial history that include your credit score.

Taking the time to make smart financial decisions that include calculating your debt-income ratio and providing a sizeable down payment can increase your chances of securing an auto loan with a low interest rate.

It is important to do your research and “shop around” before accepting any bad credit auto loan offer. Not only will this help ensure that you are getting the best interest rate, it also reduces your chances of falling for any potential auto loan scams.

How To Quickly Raise Your Credit Score

Your credit score is important if you want to be approved for a loan. It will also affect your ability to purchase anything on credit.

Getting and keeping a good credit rating does take time and patience. You can’t avoid this. However, there are a few things you can do to help it improve a little faster.

One tip to remember is that accurate negative information can never be legally removed, no matter how damaging it is to your credit score.

7 Tips to Help You Quickly Boost Your Credit Score

Before you can start working on improving your credit score, you have to know what it is. You are entitled to one free report every twelve months from the three credit reporting agencies, Experian, TransUnion and Equifax. Along with your score the report will include your complete current credit history.

Now that you know what your credit score is you can start taking steps to help it improve.

Consider the “buddy system”.

This only works with the cooperation of a close family member or spouse, and it is an effective way to quickly build up your credit history.

It entails your name being added as an authorized user on their credit account. While you won’t receive full credit for payments made on time, the little that is applied will help you create a positive credit history.

There are some downsides to using this approach that you should be aware of since they can also hurt your credit score.

You are also accountable for any bills on the account.
Late and missed payments will hurt your credit score.
Can cause tension between you and the primary account holder.

For these reasons alone, most financial experts recommend only using this as a last option when you are trying to build or repair your credit.

Report all lost, stolen and missing credit cards.

It is surprising how many consumers don’t consider this simple hack to improve their credit scores. It usually only takes a few minutes to report a credit card as missing or stolen, and in most cases it can have enormous benefits.

The most important being that it is one of the most effective ways to prevent identity theft, along with fraudulent charges being made on the account.

Most credit card issuers will simply close the account in question and open a new one. Where this can also help boost your credit score is that many banks and credit unions simply transfer the original opening date of the account to the new one. When it is reported to the credit bureaus it appears that you now have two established lines of credit. This is especially helpful since the age of the accounts comprises 15 percent of your credit score.

Not all credit issuers report lost or stolen cards the same way so it is important to ask how it will affect your score.

When are your payments reported?

You will want to note that the payment due date and the end of the monthly billing cycle are different.

Your payments will be reported at the end of the billing cycle, even though they are typically due at the beginning or middle of the month. If your payment date is during the last week it might not be reported until the following billing cycle.

The reason you want to pay attention to when your monthly payments are reported is so you can take advantage of “credit utilization ratio”.

This refers to the amount of credit you’ve used versus the amount available, and applies to every card in your name.

Financial experts recommend having a ratio of 30 percent for each card. However, if you want to quickly boost your credit score try to keep your credit utilization ratio less than 10 percent.

For this to benefit your FICO score you will also have to make sure that the payments are regularly reported during each billing cycle. This means that you might have to make the monthly payments before the actual due date.

Make a strategic payment plan.

This is actually easier than it sounds. Now that you are aware of credit utilization ratios, you know that paying off cards with higher balances will have a faster impact on your score.

Taking a few minutes to create a payment plan that allows you to quickly pay off cards with higher debt, while staying current with your other financial obligations can give a quick boost to your FICO score.

Make payments twice a month.

Nowhere does it say that you can’t make two payments on a loan or line of credit twice a month. You do want to be careful if you are paying off the debt early. Sometimes it can come with penalties that can end up hurting instead of helping your credit, though this typically only applies to mortgages and auto loans.

Most credit card companies do not charge penalties if you pay the debt off early, and making two payments during a billing cycle can help your score improve faster.

If you can afford to pay off a “big ticket” item in a brief period of time, this might be the best way for you to give a low credit score a quick boost.

Increase your credit limits.

If one of the reasons your credit score is below subpar is due to overspending, you will want to skip this step. Increasing your credit limit will only cause additional problems with your finances and score.

Raising the limits on your cards can help lower your credit utilization ratio, which is used to compile your FICO score. It is important to remember that just because you have more credit, using it will have the opposite effect on your score.

If you have made your payments on time and have a good relationship with the card issuer, asking to increase your line of credit is an easy way to see your score quickly rise a few points.

Mix up the type of credit you use.

It’s not uncommon for consumers to get stuck using the same types of credit, typically cards and mortgages. While these regular payments will help keep your credit score above the subpar range, it won’t cause any sudden increases.

If you want to give your credit score a quick nudge consider taking out an installment loan. Whether it is a two or three year auto loan or shorter in-house financing on a new appliance, simply mixing up the type of credit reported in your history can have a positive effect.

You will want to remember that this method doesn’t apply to refinancing existing loans, only new ones.

The Final Word

These tips will help you give your failing credit score a quick boost, but they are not an instant “fix-all” for a bad score. It is always important to remember that while it only took a few months for your credit to fall below subpar ratings, it can take years to get it up to good standings.

If you want to help your credit score there are two things that you must do before using any of these tips,

Keep credit card balances low.
Pay all bills in full and on time.

Simply by doing this every month you might never need to use any of these tips, but if your credit score does take a dip they can help you give it a little boost.

What To Expect At A Buy Here Pay Here Lot

Below average credit scores and limited credit histories can make it difficult for potential car buyers to secure the financing they need.

If you’ve been turned down for an auto loan by traditional lenders you are not alone. It also doesn’t mean that you won’t be able to purchase a vehicle, only that you might want to consider other financing options.

Buy Here Pay Here Financing

When your car loan application has been denied by traditional lenders due to your poor credit score or history it might be time to consider a Buy Here Pay Here (BHPH) dealership.

At a BHPH car lot the financing is usually arranged in-house, which means your monthly loan payments will be made directly to the dealership.

Since the primary goal of the BHPH dealership is to sell vehicles, your chances of being approved for financing are significantly higher than through a traditional lender.

Often all you need at a BHPH lot is a verified address and employment to drive off the lot that day in a “new” used vehicle.

BHPH Auto Lots vs. Traditional Dealerships

There are several noticeable differences between BHPY auto lots and traditional car dealerships, other than their willingness to approve your application for financing.

Unlike traditional car dealerships where you select a vehicle then apply for financing, the process is reversed at a BHPH lot. First, they will decide how much they are willing to lend and this will determine what vehicle you are able to buy.

Your monthly or in some cases bi-weekly auto loan payments might also have to be made in person, instead of being mailed in. This means that it might be more convenient for you to find a BHPH dealership close to work or your residence.

BHPH Benefits

There are a few benefits associated with Buy Here Pay Here lots that might make it worth your time to at least consider applying for financing through one. These include,

They are willing to offer financing to customers that have been turned down by traditional lending institutions due to imperfect credit scores.
If the BHPH lot reports to the credit bureau making the auto loan payments on time can help raise your low FICO score.
Most BHPH lots are willing to accept older vehicles as trade-ins, unlike traditional dealerships, and this can help reduce the amount needed for the down payment.

What Everyone Should Know About BHPH Dealerships

Before you decide to purchase a vehicle from a BHPH car lot there are a few things you should know. If you’re not familiar with applying for a bad credit auto loan through a BHPH lot, you could end up with a vehicle that costs more than you can comfortably manage.

Unlike banks and credit unions where your entire financial picture is carefully looked at, this isn’t always true at BHPH lots.

Their main goal is to sell you the “most car for your money”, which means you could easily end up with a vehicle you simply can’t afford.

To ensure that your experience at a BHPH lot puts you behind the wheel of a vehicle you can make timely payments on, here are a few tips to help you get started.

What is your credit score?

As soon as you start thinking about buying a new or used vehicle, the first thing you should do is check your credit score. Knowing your credit score ahead of time can give you some leverage when negotiating the terms of the car loan. It will also give you a good idea of what type of vehicle you should be approved for.

Even though most BHPH car dealerships are reputable scams can occur, and knowing your credit score is one of the best ways to protect yourself.

Watch out for the “Yo-Yo trap”.

Even though this is illegal, some dishonest BHPH lots will try and increase the amount of the payments or interest rates after you’ve owned the vehicle for a few weeks. If you don’t accept the new conditions of the car loan, the vehicle will have to be returned to the dealership.

While this scam is rare, thanks to stricter enforcement of federal laws, it is still important that you make sure that all the terms of the auto loan agreement are finalized before driving the vehicle off the dealership. Simply taking the time to read the documents before signing can prevent this and other problems.

Credit problems cannot be hidden.

Some people mistakenly believe that since the financing is through the dealership their credit history won’t be thoroughly checked. This couldn’t be further from the truth. Your past credit problems will be scrutinized and the dealership will have questions. It is always best to be upfront and honest, especially when financing through the BHPH lot is your only option.

How much can you afford?

The majority of BHPH lots won’t consider your other financial obligations. This might mean that you’ll be approved for a loan amount higher than you can afford.

When you are trying to decide how much car loan you can handle it is important to also factor in the cost of,

Fuel
Insurance
Maintenance
Annual registration/inspection

All of this will quickly add up, and affect how much you can pay on the loan each month.

The length of the car loan.

Most industry experts recommend avoiding bad credit auto loans that last longer than 4 or 5 years. Even though extending the length of the loan can lower your monthly payments, over time you will end up paying more than the vehicle is worth. In some cases you could still be making monthly payments on a vehicle that is no longer under warranty.

This means that you are now responsible for any manufacturers’ defects and no longer eligible to participate in most recalls, if any do occur.

There will be a down payment.

The main downside for many bad credit auto buyers is the fact that they will need a down payment. The amount will vary depending on a few factors,

Credit score/history
Type of vehicle

Financial experts recommend a down payment of 20 percent, but this can be difficult for most cash strapped auto buyers with subpar credit. Most BHPH car lots will work with you on the amount of the down payment, but you should expect to pay something before leaving the dealership with a new vehicle.

Price listed without haggling.

One advantage of purchasing a vehicle through a BHPH lot is that the listed price is usually exactly what you’ll pay. Often referred to as “no-haggle dealers” you might not be able to lower the vehicle’s asking price, but there also won’t be any surprise increases in the final loan agreement.

There is a difference between a “vehicle service contract” and a “warranty”.

It is extremely important that you understand the differences between a “vehicle service contract” and a “warranty”.

A warranty is offered through the manufacturer, and it is included in the vehicle’s closing price. These warranties typically last for 10 years or 100,000 miles, and will cover most problems that occur during this time. You might also hear them referred to as “bumper to bumper” warranties since they usually cover everything in between.
Vehicle service contracts are similar to warranties, except that they are offered at an additional cost. They are often recommended on used vehicles that might not be covered under the manufacturer’s warranty. While a vehicle service contract might cost extra, the good news is that some BHPH dealerships will let you extend the coverage for added protection.

Congratulations! You Purchased a Vehicle

Now that you know what to expect at a Buy Here Pay Here dealership you’re ready to start shopping for a dependable vehicle. The buying process might be a little different, even how you make the payments, but this could be the best option for you if you have less than stellar credit.

Just remember to take your time, do your research and come to the car dealership prepared, and you can find yourself behind the wheel of a vehicle that is perfect for your lifestyle and budget.