Author: Lalit Aggarwal

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.

Applying for a car loan can be scary, especially if you have bad credit. There are forms to fill out, paperwork to organize, and then there is always the risk of being turned down. Getting a car loan doesn’t have to be frightening, it can actually be pretty easy once you have a good idea of what is needed. In this guide we will answer your questions and provide you with the information you need to be approved for a car loan for bad credit.

History of car loans for bad credit

Car loans have been around for more than 90 years. Initially they were designed to help the average American afford an automobile. Payments were made to the dealership on a weekly basis, until the car was completely paid off. The issue of a person’s past credit rarely came up, and consumers only needed to show proof of gainful employment in order to drive a car off the lot.

By the mid 1980’s things had begun to change. After the oil and resulting financial crisis in the 1970’s, many Americans were finding it tough to make ends meet. Foreclosures and repos were common, and when the economy began to improve in the 1980’s people were ready to finance a car.

Unfortunately banks were often wary of approving auto loans if a repo or foreclosure was listed on the applicant’s credit report.

For one of the first times in the auto industry a person’s credit history and score was playing a major role in whether they were approved for a car loan.

An overwhelming number of applicants found that due to their bad credit score they were not approved for a traditional car loan, and Buy Here Pay Here dealerships saw this as an opportunity to make their car lots a success. Since the 1980’s Buy Here Pay Here lots have been approving bad credit auto loans for consumers across the nation.

How do car loans for bad credit work?

Bad credit and traditional car loans both work the same way. You will fill out the required application, which is typically the same for both types of auto loans. You will also be required to provide the same information and supporting documentation that will include,

• State or federal license or id.
• Proof of residency (usually a utility bill)
• Documented employment history
• Proof of earnings (paycheck stubs, tax records and bank statements can all be used to provide proof of income)
• Most recent copy of your credit history and FICO score.

Where a bad credit car loan differs from a traditional one is where you apply and the amount of the interest rate. Instead of applying at a bank or credit union, you will fill out and submit the paperwork at the Buy Here Pay Here lot.

In many cases consumers are approved on the spot, especially if they have a substantial down payment in hand. A trade-in can also help speed up the process, and even increase your chances of being approved.

The main area where bad credit auto loans differ is their high interest rates. If you have bad or even no credit you will probably be stuck paying these high interest rates. The good news is that once you have finished paying off the bad credit car loan the next time you need to finance a vehicle your FICO score should have improved enough that you can go through a traditional lending institution.

It is important to remember that while most Buy Here Pay Here lots are honest, there are some that aren’t quite as trustworthy. If you are asked to pay an interest rate higher than 15 percent, you might want to consider taking your business elsewhere.

Are there car loans for people with bad credit and no money down?

A common question asked by people with bad credit is if it is possible for them to get a car loan with no money down, and the answer is “yes”. You just have to be willing to do your homework and take the time to carefully research all of your lending options.

In almost all cases a traditional lending institution will not approve a bad credit auto loan, especially if you don’t have a substantial down payment. Even if you do have a down payment your chances of being approved are slim if you have bad or no credit.

Simply by researching the options offered at the various Buy Here Pay Here lots can put you behind the wheel even if you don’t have a down payment.

One option is to use your old vehicle as a trade-in, and some Buy Here Pay Here auto lots will take this in lieu of a monetary down payment.

If you don’t even have a trade-in you can still get approved for a bad credit car loan at some Buy Here Pay Here lots. Once again it is important to do your research, so you can find the dealerships most likely to consider your loan application.

There are some things you can do to vastly improve your chances of being approved and this typically includes,

• Knowing your current credit score and making sure your report is accurate.

• If you have unused credit accounts it is important to leave them open. Closing an account simply due to unuse can shorten your credit history, which in turn lowers your FICO score.

• Make sure you have a valid phone number so any potential lenders can reach you quickly and easily.

• Have proof that you have resided at the same residence for at least one year.

• Have steady and verifiable income.

• If possible pay off smaller credit card bills to show potential lenders that you are capable of paying your debts.

• Be familiar with recent auto loan rates. While you will be paying higher interest rates on a bad credit car loan with no down payment, knowing what is being charged by a traditional lender will help you when you are negotiating with the dealership.

While these tips will not guarantee that you will be approved, it will significantly improve your chances especially if you do not have a down payment or trade-in.

What banks do car loans for bad credit?

While your best chances of being approved for a car loan with bad credit will probably be through a Buy Here Pay Here lot, there are some banks that also work with clients that have poor FICO scores.

It is impossible to list all of the banks that are willing to take a chance and approve a bad credit auto loan.

The acceptance rate for each financial institution varies, and approval is often based on an individual basis.

You can find listings for most of the major banks and credit unions that will include their approval ratings for auto loans. A good place to start reviewing banks is at Credit Karma, where you can also check your history and FICO score.

Doing a little research first will help narrow down your possible options, and save you some time since you won’t be filling out applications at banks that have a record for turning down bad credit auto loans.

There are also a few steps that you can take that will dramatically improve your chances for being approved. These can include,

1. Know your current credit score. If it is 501 to 600 you are considered a subprime borrower, and below 500 is considered “deep subprime”. If your credit score is 500 or lower you will probably want to wait until you have managed to raise it to apply for an auto loan from a bank.

1. Have all of your documents in order. This will include current id, proof of residency and employment, along with a report of your credit history.

1. Don’t ask to borrow more than you need or can afford. Banks already have a copy of your earnings and know exactly what you can afford to borrow. If the amount is too high your chances of being approved will decrease significantly.

1. Be prepared to use a cosigner. Sometimes the only way to be approved for a bad credit car loan is with the help of a cosigner. While this isn’t always necessary at a Buy Here Pay Here dealership, it is often a condition for approval at a bank or credit union.

Are there car loans for bad credit without a cosigner?

If you have great credit than getting a car loan is pretty easy, even if you are applying on your own. On the other hand if you have bad credit getting approved can be challenging, especially if you don’t have a cosigner.

This doesn’t mean you should just give up and start looking for a bicycle, there are steps that you can take to increase your chances of being approved for a bad credit car loan even if you don’t have a cosigner.

Credit scores below 650 are generally considered to be subprime, and this often causes traditional lending institutions to view you as a high risk applicant. Buy Here Pay Here dealerships on the other hand often have in house financing, and this can make it easier for you to get the approval you need.

If you have bad credit and no cosigner you will need to have a down payment. In some cases it might need to be significantly larger than that required of someone with good credit. You should also expect to make larger monthly payments, and the interest rate on the loan will be higher as well. Having a decent trade-in can also improve your chances of being approved especially if it is combined with a large down payment.

Once you have all of your paperwork in order and the necessary down payment, you are ready to apply for a bad credit auto loan without the help of a cosigner.

It is important to remember that you might not be approved the first time you apply. If you can’t wait for your credit score to improve or find a reliable cosigner, then all you can do is keep trying and continue to put money aside to increase the amount of your down payment.

Can I get a car loan with bad credit and a repo?

After the collapse of the housing market bubble and subsequent financial crisis, millions of Americans suddenly found that they couldn’t make ends meet. By 2010 the three major credit reporting agencies were releasing statistics that showed vehicle repossessions were at an all-time high.

Even though these rates have been steadily falling in most states since 2012, millions of people are still dealing with the consequences of a vehicle repossession in their credit history.

According to Experian, one of the main credit reporting agencies, an auto repo can stay in a person’s credit history for up to 10 years.

Having a past auto repossession will also have a negative effect on your credit score, and this will make it difficult to find a lender willing to take a risk and approve you for a car loan. It should be clarified that having bad credit and a repo will only make it difficult to be approved, not completely impossible. There are a few things you can do to improve your chances of driving off the lot in a new or used vehicle.

1. Do your research first. Credit Karma, Experian and Equifax all keep track of banks approval rates and update their postings on a regular basis.

2. Know your current credit score and update your history. Even though a vehicle repossession will stay on your credit report for up to 10 years, making other payments on time will help balance out its negative effects. You want to make sure that these payments appear on the latest copy of your credit report to reassure potential lenders that you are able to pay your bills on time.

3. Be prepared to lay down a large down payment. If you have bad credit and a repo you will need a substantial down payment. A trade-in can help lower the amount of the payment, but at almost any Buy Here Pay Here lot you will need to put some money down.

4. Consider using a cosigner. A cosigner with a good FICO score and strong credit history can significantly improve your chances of being approved for a car loan. If you also able to afford a large down payment, there is a chance you could even be approved by a traditional lending institution.

Having a vehicle repossession and bad credit will make it a little more difficult to be approved for an auto loan, but it does not mean that it will be impossible.

What credit rating qualifies for a bad credit car loan?

One of the first things you should know is that individual lenders set their own standards for “good” and “bad” FICO scores. For those potential borrowers on the cusp, this can work to their advantage. Where one bank might consider their credit score to be in the “poor” range, another might have it listed as “fair”.

If you are willing to take the time and do a little research you might be able to find a lender that doesn’t consider your credit score to be in the subprime range.

While there can be some slight variations on what is considered a good or bad credit score there is a general formula that all banks, credit unions and auto dealerships follow. This will also give you a good idea of where your personal credit score falls.

• 300 – 629: Bad credit
• 630 – 689: Fair credit
• 690 – 719: Good credit
• 720 and up is considered an excellent credit score.

The auto industry occasionally uses a slightly different system that ranges from 250 to 900, but the general principle is the same. If your FICO score is below 650, you are considered a subprime borrow and qualify for a bad credit car loan.

Are there car loans for bad credit with low interest rates?

Surprisingly enough there are car loans for bad credit with low interest rates, you just have to know where and how to find them.

The strengthening economy and stable job market has resulted in more Americans searching for a vehicle, and this has caused competition among potential lenders. While most banks and credit unions are still only offering bad credit auto loans with high interest rates, many of the Buy Here Pay Here lots are competing with each other to secure your business. This means that you have more leverage when it comes to negotiating the interest rates on the bad credit car loan.

You can also improve your chances of getting a car loan with low interest rates even if you have bad credit simply by following these steps. While it might take a little time, it will be worth it in the long run when you are making smaller monthly payments and get the vehicle that you want.

1. The most important step is to shop around. Competition for business is fierce, and Buy Here Pay Here lots are willing and eager to work with potential customers.

2. Be familiar with the average interest rates on all types of auto loans. This information will be extremely helpful when you are negotiating with a potential lender. In general you should expect to pay interest rates around 4 to 5 percent if you have good credit. If you are applying for a bad credit car loan your interest rates will probably be around 10 to 13 percent.

3. The National Consumer Law Center recommends being familiar with your credit score and report before starting negotiations. Some consumers have found that will their score might still be in the subprime level their credit history was strong enough to qualify them for a lower interest rate. It is important to remember that recent payments show up in your history well before they affect your FICO score.

4. Subprime ratings vary by industry. As previously stated credit ratings can vary slightly in the housing and auto industries. What might be considered subprime in the housing industry could fall into the moderate level in the auto market. This is just one more reason you should be familiar with your credit score.

5. Bring a friend or relative along when you are applying for a car loan with poor credit. A consumer attorney based in Massachusetts recommends employing this strategy during the negotiations. Sometimes simply having their support can give you the confidence you need to negotiate terms you and the auto dealership can live with.

6. The length of the payment period matters. If you receive a low interest bad credit loan that is stretched out over a long time, in the end you will still be paying more for the car than you would with a good FICO score. When you are negotiating for lower interest rates you also want to keep the loan to a period around 64 to 80 months. This ensures your payments are still low and that the car won’t deprecate significantly in value before it is paid off.

7. Look for any “add-ons” in the loan agreement. If you have bad credit you are a subprime borrower and this puts you at risk for “add-ons”. This is a trick car dealerships employ in order to make the most money off of the sale. You may think you are getting a great rate on the loan but by the time you are done paying for the extra goods and services added on to the final cost, it won’t matter that you negotiated for low interest payments.

8. Make sure that the terms of the loan agreement are final. It is not uncommon for bad credit auto loans to initially come with low interest rates that quickly skyrocket after a set period of time. Legally the Buy Here Pay Here lot or any other financial institution does not need to verbally discuss this with the applicant, as long as it is printed in the agreement. This means that it is your responsibility to see that the terms of the auto loan are final and not flexible.

Can a car title help get an auto loan for bad credit?

There is only one way to answer this question, and that is to simply state that it is a bad idea to use a car title to secure a auto loan for bad credit. You can though find hundreds of places willing to loan you thousands of dollars towards the purchase of a new vehicle even if you have bad credit, as long as you are willing to temporarily sign over your car title.

Consumer affairs activists, credit monitoring agencies and financial experts all agree that the while this may be an easy way to get money fast, a title loan lending company is never the best route to go.

In some states car title loan companies are very loosely regulated. They do not meet the requirements necessary to be classified as a “financial institution”, and are therefore not required to meet industry standards. This loophole in state and federal laws has made it possible for these companies to charge outrageous interest rates.

It is not uncommon for title loan companies to charge 25 percent interest on payments per month, which equals to an APR of 300 percent.

With interest rates that high most borrowers find that they need to take another title loan out just to stay current with the first one. Before they know it they are behind on both titles loans, and their vehicles are repossessed.

Now not only are they dealing with an even lower FICO score, there are also vehicles repossessions on their credit history. Adding to their problems is the fact that they are now without a vehicle. As tempting as it might be too go to a title loan company if you have bad credit and need a car, it is still better to take your time and apply at a traditional lending institution or a Buy Here Pay Here lot. In the long run you will be glad that you did.

Are there car loans for bad credit and centrelink?

Many consumers want to know if it is possible for them to get a car loan if they have bad credit and are living on disability, and the answer is “yes”. You can get a bad credit car loan even if your only income is your disability payment.

Being on Centrelink, Social Security and other programs does not necessarily mean that you won’t be approved for an auto loan. While having bad credit and only being able to show proof of disability income will make it more difficult, if you follow these next couple of steps you can get approved for an affordable car loan.

1. Be able to show proof of income. Even though you may be living on centrelink or SSI disability payments, it still counts as income. Keeping records of all of the payments is crucial when you are establishing proof of income. If the checks are deposited into your bank account you will want to have these records in order.

2. Is there more than one income in the household? If the only income is from your disability payments you can still get approved for a bad credit auto loan, but if your spouse or significant other is also contributing to the household finances this could significantly increase your changes for approval. You do not need to list your spouse on the actual vehicle title or even add them to the loan agreement, but being able to show additional income can give potential lenders extra peace of mind.

3. Consider a cosigner. If the amount of the loan exceeds what the lender believes you can afford or if your credit is almost nonexistent, you might need to consider taking on a cosigner. While many applicants resist the thought of involving someone else in their personal finances, sometimes it is the only way you can get the approval you need to drive off the lot in a new vehicle.

Are there auto loans for bad credit with a private seller?

You can find auto loans for bad credit with a private seller, and there are pros and cons associated with this option.

In some cases going through a private seller can increase your chances of being approved, but it can require a lot of time and effort on your part.

Some of the advantages of a bad credit auto loan with a private seller are that you have several possible options to choose from. You can pick which loans to apply for based on the lender’s approval ratings, and this can dramatically improve your chances of getting the financing you need. This is an important tip to remember since not being approved for a loan can lower your credit score.

A private party loan can also provide you with the unique opportunity of dealing directly with the seller. This means that it is easier for you to negotiate interest rates and other payment terms. Since you are probably dealing directly with the vehicle’s previous owner it is generally easier for you to get a complete history of its repairs, along with any problems that might need to be dealt with in a timely manner.

While there are advantages to a bad credit car loan with a private seller there are also some disadvantages. These can include,

• The length of the loan is typically shorter, which often translates into higher monthly payments.

• You will not be eligible for any dealer incentives, and some manufacturer’s warranties may not be valid after a private sale.

• In most cases you will need loan approval before approaching a private seller, and this can limit you in the final negotiations since you already know exactly what you can afford to spend.

While there are pros and cons to private party bad credit auto loans in some cases the advantages may make this the best option for you.

What are the car loans for bad credit reviews saying?

When it comes to bad credit auto loans the reviews are mixed, and this is due to all of the available options. Credit Karma, Experian and Equifax all agree that you need to take your time and carefully research your options before applying for any type of car loan.

Car loans for bad credit from a bank or other traditional lending institution generally receive good reviews, and the same is true for most Buy Here Pay Here lots.

It is important to do your research since interest rates can and do vary between dealerships.

If you want to find reviews for bad credit auto lenders near you, most financial experts recommend checking with Credit Karma or Experian. You will also be able to finding approval ratings so it will be easier for you to choose the right lender for your bad credit car loan.

If you have found yourself in a situation where you need a different car but your credit isn’t the best, rest assured that you are not alone. The truth is, there are a lot of people throughout the country that have credit issues. Unfortunately, recent economic downturns and the loss of jobs has forced a lot of people into bad credit situations when they never thought they would be in that situation themselves. Furthermore, there are times when good people simply can’t pay back their debt because something unexpected has happened. Sometimes, it is as simple as getting in over your head or biting off more than you can chew, so to speak. At other times, it is the direct result of an added major expense, an illness or injury, or the loss of income through no fault of your own. Either way, the fact that you have bad credit doesn’t mean that you are a bad person, nor does it mean that you are not worthy of being given another chance. Unfortunately, a lot of people treat individuals with bad credit like they are no longer worth dealing with.

Of course, this isn’t true, not in the slightest.

It doesn’t change the fact that you will have to look harder when it comes to finding someone that you can purchase a reliable car from if you have bad credit.

1)   You have options. Don’t Get Taken For a Ride

Fortunately, it is possible to find the car that you are looking for and purchase it even if you have a lot of credit issues. It means that you are going to have to work harder as a consumer to make sure that you are dealing with a company that is reputable and that is genuinely concerned about your well-being. The most important thing you need to remember is not to allow yourself to be taken for a ride. This is not intended to be some type of cute pun. There are a lot of so-called car dealers out there that prey on people with bad credit and they are anything but fair. You might think that you don’t have any options available to you because of your credit situation.

This in turn might lead you to take the first offer you get it, even if it is ridiculously unfair. Remember, you always have options available to you. Furthermore, you are purchasing an automobile that you will probably be paying on for the next four to six years. Therefore, you must choose a lender that can provide you with a fair deal. In the best situation, you will also find one that is willing to work with you and help you improve your credit situation over time.

ApproveNow helps you find fair lenders to work with at no charge so you can save yourself from this trouble.

Tips:

1) Don’t allow yourself to be talked into a situation where you are going to be paying an unfair amount every month or dealing with a bunch of malarkey simply because you have bad credit.

2) In other words, insist on finding a reputable dealer that respects you as an individual, as opposed to treating you like you are nothing but a number on a piece of paper.

3) ApproveNow helps you find the right lender to work with.

2)   Will Mainstream Car Dealerships Finance Someone With Bad Credit?

The short answer to this question is yes. However, they probably won’t finance you through their regular financing department. That means that you probably won’t get financed through the same department that finances those people who have good or excellent credit. Most car dealerships and even most major automobile manufacturers have a financing department that is designed specifically to handle their customers who have credit issues. If there are a few problems with your credit, you can probably expect to get financed through one of these departments. If you have several significant credit issues, you may not be able to get financing through them either. However, that does not necessarily mean that you cannot get financing for that automobile at all.

In reality, you might be able to go to an outside or third-party lender in order to get the financing.

3)   How To Make the Right Choices – Be ready.

The thing that you have to do is be careful about who you do business with so that you are not accepting a deal that is virtually impossible to pay off. Your best bet is to visit a car dealership and be honest with them from the beginning. Know your credit rating ahead of time and know how much you have available as a down payment. If you plan on trading in your old car, that can help you even more. It is important that you have cash for a down payment, even with a trade-in, especially if you have bad credit.

Typically, you should expect to have at least $1,000 available for the down payment in addition to your trade-in. Obviously, if you can double that amount, it helps you even more. This could be the difference between getting financed or being turned away. If you approach the sales floor and openly ask them whether or not you are eligible for financing with your given credit score and the amount of money that you have to put down, you will probably get a lot further in a shorter amount of time than if you try to conceal this information and act as if you have an excellent score. Try not to get too nervous about visiting a car dealership and remember that it is possible to find car dealerships that finance bad credit. People do it everyday.

Tips:

1) Know your credit score ahead of time.

2) Be honest about your situation.

3) Don’t take a deal that isn’t right for you.

4)   Other Car Dealers That Work With Bad Credit

Of course, you have undoubtedly seen the commercials of the random car dealers that work with bad credit on television or you have heard them on the radio. There are many reputable car dealers out there that specialize in dealing with people who have bad credit and there is certainly nothing wrong with purchasing an automobile from them. However, there are also some that are not so reputable, taking advantage of individuals who have bad credit.

Tips:

1) Carefully research your options before you buy a car.

2) Don’t purchase a car from anyone that makes you feel uncomfortable.

5)   Standing Up for Your Rights

If you purchase a car from the wrong dealer, you might end up paying a ridiculous amount of money in interest fees, far more than necessary. There might also be other fees tacked on, not to mention other issues. Find a lender that understands your situation and is willing to help you. There are plenty of good lenders out there that specialize in helping people with bad credit. Finding them is the key.

Tip:

The right lender can make all the difference so be patient when looking for one.

6)   Ways To Deal With Interest Rates

Unfortunately, you will have to pay more in interest rates if your credit score is relatively low. The amount of interest you will pay directly correlates to your credit score, so the lower the score is, the higher the interest rate. This essentially means that you will be paying more money for an automobile than someone with good credit. For example, a person with excellent credit might be able to get a new automobile at a 0% interest rate.

Tip:

The better your credit score, the better interest rate you will get.

7)   Interest Rates Explained

If you have credit issues, you might find yourself paying anywhere from 10 – 20% in interest, depending on your score. In severe cases, individuals with extremely low scores may end up paying even more. The same is true if you have had a bankruptcy. This has a major impact on your credit score so you will pay more in interest rates.

You can still find someone to finance you, even at a dealership.

However, you will also pay more for getting their financing. This is something that you simply have to deal with and it makes it more important than ever to shop around in order to get the best interest rate that you possibly can. In addition, it provides you with ample motivation to work on improving your credit score over time so that you can get better interest rates in the future.

Tip:

You can still get financing with bad credit; however, it will cost more when it comes to financing.

8)   Know the Pros and Cons and Be Informed.

Now that you know that it is possible to get financing, you know that one of the biggest advantages of dealing with specialty lenders is that they frequently do provide financing for a new automobile even if your credit is bad. Therefore, you should never assume that you won’t qualify because there is a lender out there somewhere that will finance you. You also know the potential pitfalls of dealing with these lenders and you know what to look for.

This allows you to take control of the situation so that you are creating a positive environment that works in your favor as opposed to working in the favor of someone else at your expense. Use this opportunity to increase your credit score. Make your payments on time and do everything you can to ensure that your good payment history is reflected. It might take some time, but this can go a long way toward improving your credit score and getting you in a much better situation in the future.

Tips:

1) People with bad credit get financing every day.

2) Choose your lender wisely.

3) Don’t be afraid to negotiate.

9)   Making It Work

If you are driving a car that spends more time in the shop than it does on the road, it is probably time to get financing for a new one. Don’t allow yourself to continue struggling with an automobile that no longer works well for you just because of some number that a credit agency has assigned to you. You always hear credit lenders talking about how you are more than just a number and how they approve people based on the whole person because they see beyond the credit score all the time. You have to believe that as well. You are far more than just your credit score. It doesn’t reflect all of the information there is to know about you and you should remember this when you are dealing with potential lenders.

Tip:

Don’t be ashamed because of your credit score; it doesn’t have to define who you are.

1) You have options. Don’t Get Taken For a Ride10)  Summary

Unfortunately, some lenders are going to try to push you around or stick you with a deal that is anything but beneficial. That is why it is so important to know the pros and cons of dealing with these letters, as well as knowing your own credit score and saving up for a potential down payment. All of this has a direct impact on your overall experience. If you are willing to put forth the effort, you can find a decent lender that will give you a reasonable deal on a new car. The best thing you can do is be diligent about doing your research and don’t be afraid to turn the lender away when your gut instincts tell you that you can do better.

The dealers that prey on people with bad credit will try to tell you that the deal they are offering you is the best you will ever be able to do. The truth is, they have no idea what someone else is willing to offer and they are only trying to tell you that to get you to take a deal that is unfair in the first place. You will probably have to deal with a lot of people like that. However, it is worth it to sift through all of the unfavorable lenders in order to find the right one.

Tips to Remember:

1) Never limit yourself because of your credit.

2) Explore all of your options.

3) Do your homework and be cautious about who you choose to do business with.

4) Relax.

5) Create a better situation for yourself than the one you are currently in.

6) You can do this!

Consumers have a lot of questions when it comes to bad credit auto dealers, and this is natural. It is not uncommon for people to be too ashamed or embarrassed to ask these questions themselves, since no one really wants to admit that their credit is so poor that they can’t get financing from a traditional lending institution.

To make sure that you have all of the information you need to make the best decision, we have listed some of the frequently asked questions about bad credit auto dealers and the answers below.

FAQ

Are there bad credit auto dealers near me?

One of the most common questions asked by consumers is if there are car dealerships near them that specialize in bad credit auto loans, and the answer is yes.

These dealerships are often referred to as Buy Here Pay Here or subprime lots and you can find them in almost every U.S. city. These car lots are typically located in the metro area due to the fact that the need for a vehicle is generally greater since residents in these neighborhoods generally do not have public transportation. There is also more room in the suburbs for these dealerships to spread out and grow. This is a good thing since large car lots mean more choices for you.

You can find subprime car dealerships in some downtown areas, but it should be noted due to smaller lots your possible choices will be limited.

What are bad credit auto dealers?

To put it simply “bad credit auto dealers” are car lots that specialize in approving financing that traditional lenders deny. These car dealerships are known for working with customers that have no, little or bad credit. In some cases all you need is proof of employment, insurance and a down payment, but this can and does often vary depending on your credit score.

One important fact to remember about these car dealerships is that while your chances of being approved for an auto loan are significantly higher, it will also cost more. Interest rates at these car lots are higher, and in some cases you might actually be doubling the cost of the automobile.
If you are in need of a dependable vehicle to get to work or simply run errands, a Buy Here Pay Here lot might be your only option until your credit improves.

Who needs bad credit auto dealers?

One important fact to remember is that not everyone in the market for a new or used vehicle needs to go through a Buy Here Pay Here lot if their credit is above the subprime level. This is anything above 680.

Unfortunately after the recent recession a large number of Americans have credit scores below 680, and this makes them a “risk” many banks are not willing to take. If you need a dependable vehicle to get around the city and you have poor or bad credit a subprime lender might be your only option, at least until your FICO score improves.

How do bad credit auto dealers work?

The phrase “Buy Here Pay Here” can be misleading and leave consumers unsure if this is the right choice for them. The term simply came about since customers can make their monthly auto loan at the dealership, instead of mailing it into a traditional lending institution.

Other than this the process of applying for a car loan basically remains the same. Once you have found the perfect vehicle for you it is time to fill out the paperwork. Since the sales team is already aware that your credit is less than perfect, and they work on commission, there will not be any surprises regarding your FICO score and they will do everything possible to ensure your application is approved.

Simply bring in your driver’s license, proof of employment and insurance, and be willing to hand over a down payment. The amount of the down payment will depend on your credit and the cost of the vehicle, and some dealerships will even work with you to ensure that you can afford it. Once the paperwork is filled out and signed, chances are you will know in minutes if the vehicle is yours.

Which bad credit auto dealers are the best?

It is almost impossible to answer this question, though it is a good one. There are simply too many bad credit auto dealers in the U.S. to decide which one is the best. This will also depend on your particular situation, since not everyone goes to a Buy Here Pay Here lot for the same reasons.

There are some things you can look for to make sure the dealership you are going to is honest and not trying to take advantage of your situation. Car lots that charge more than 23 percent for interest rates should be avoided, and some market experts state that it should be closer to 20 percent. Anything higher and chances are the dealership is trying to take advantage of you.

Other things to look for to ensure the dealership is a good one includes its inventory and the overall appearance of the lot. If the majority of the vehicles are used and the parking lot is poorly maintained you might want to consider taking your business to another dealership. Just because your credit is below the subprime rate doesn’t mean that you have to settle. With a little effort you can find a trustworthy Buy Here Pay Here dealership.

Can I get a car at a bad credit auto dealer with no money down?

In most cases the answer to this question will be “no”. Due to your poor FICO score almost any Buy Here Pay Here lot will require a down payment. The amount will vary depending on the cost of the vehicle and your credit score, but you should be prepared to put some money down before you drive off of the lot.

If you are lucky enough to have a vehicle to trade-in this can take the place of the down payment. Once again it will depend on the Kelley Blue Book value of your trade-in and how it compares to the vehicle you are interested in.

This is not to say that there aren’t BHPY lots that are willing to wave the down payment, but this usually comes with extremely high interest rates that can make the car loan difficult to pay off. In some cases you might end up paying more than the vehicle is worth. If you don’t or can’t afford a down payment it is important that you read any loan agreement carefully for hidden fees and penalties before signing it.

Should I buy a used car from a bad credit auto dealer?

This can be a tricky question since it depends on the dealership, and the best answer is to simply be careful before you sign any loan agreement and drive a used car off of the lot.

Used cars are more affordably priced and often cheaper to insure, but the downside is that often you won’t be informed if there are any problems. Unlike major dealerships where used cars and trucks are subjected to a thorough inspection, Buy Here Pay Here lots typically just check to make sure that the vehicle runs.

This can create more financial problems for you if you are still paying off the high interest car loan and the vehicle breaks down. When the cost of repairs are added in it might be worth it to pay a little more for a new car that you know will last for years. If a used car is all that you can afford you might want to consider bringing a mechanic with you to check the vehicle over before you make your final decision.

How can bad credit auto dealers help my credit?

One of the best ways to bring up your credit score is to show that you are financially responsible, and this generally means taking out a loan. If you need a dependable vehicle and can’t get financing from a traditional lending institution a BHPH lot is usually your only option.

Even though you will be charged higher interest rates if you make all of your payments on time it will have a positive effect on your credit score. This way the next time you need to purchase a vehicle you won’t be required to pay the high interest rates that comes with a subprime auto loan.