Auto Financing for Bad Credit - Lenders Versus Dealers

Auto Financing for Bad Credit - Lenders Versus Dealers """Bad credit can prevent you from obtaining a car loan, but it doesn't have to. Information is king, and whoever is the most informed typically emerges victorious, although in this case escaping is the objective. Let's face it: it's 2014, and the Internet's ability to provide information access from anywhere in the world has altered the way we all conduct business. This kind of access to information can be advantageous or detrimental. Your credit score is one of the most essential pieces of information that potential creditors require to qualify and rank you as a customer. These creditors are not your adversaries. Indeed, they are our allies (at least we should pretend they are). They hold the literal keys to your new auto loan. In the absence of poor credit, the credit report informs the auto lender of the risk involved in lending you money. Playing The Match I'm going to take a moment to discuss """"Why You Don't NEED the Money from Bad Credit Auto Lenders!"""" Well, you do need their money to successfully finance your auto loan, but there is an important distinction I'd like to highlight. Simply do not """"Act"""" as if you are desperate for their money; you must play the game as they do. If you have poor credit and are in dire need of a new automobile, desperation is your worst enemy. Lenders do not make a profit by lending you money and requiring you to repay it in full. They profit from the interest on your auto loan, and these rates can be quite exorbitant. Up to 20% depending on the lender, but around 15% on average for those with poor credit. My point is that you should NOT accept the first loan offer you receive; rather, you should Negotiate! Lenders are aware that you have likely been rejected multiple times (they can tell by simply reviewing your credit report) and that, now that you have been approved, you will simply accept whatever loan terms they offer. Do not be afraid to let them know that you are interested in the loan, but that the interest rate or total monthly payments are too high for you to sign on the spot. This tip is more mental, but extremely useful and effective.
Know Their Game Plan
Your credit score is a snapshot of your past, but an indicator of how future business dealings with you may go. Auto lenders are only concerned with the risks versus the benefits. Now, I have avoided using the terms ""car dealer"" and ""auto dealership"" on purpose. I wanted you to start separating the concept of lender and dealer. Your neighborhood automobile dealerships do not lend money, nor do they have any to lend you! (I am certain they would if they could) Car dealerships are merely middlemen; they hold car inventory and have all the local resources required to sell vehicles and negotiate the terms and conditions of the loan between the lender and you. Here are some helpful tips to keep in mind so that you are not easily taken advantage of by the bad credit auto dealers in your region. Check into them:

You should never be forced to purchase an extended service or warranty agreement. This is a favorite tactic of dealers because it puts profit directly in their pockets. This is where my rants about the distinctions between dealers and lenders become relevant. Dealers profit from the difference between what they owe the automaker and what they sold the vehicle to you for. (They are also compensated for meeting monthly, quarterly, and annual volume targets) This shady strategy is designed solely to capitalize on your desperation and extract additional profit from you in times of need. You are here to increase your knowledge, which will hopefully bring you one step closer to obtaining a loan for a new or used automobile.

Know Your Score - Nothing could be simpler. This is a step that should never be skipped. Before entering a dealership, it is imperative that you know your credit score. Loans for people with poor credit typically carry high interest rates and may require larger down payments. This fixed interest rate originates directly from the bank, preventing dealers from adjusting or manipulating it. However, they consistently misrepresent the amount of the down payment required to secure your new loan. The lender may request a $2500 down payment, but the dealership will require $5,000. Again, they intend to retain the additional $2500 as profit. Typically, they can extort this additional cash from you by lying about your credit score and scaring you into believing that $5,000 was required by the bank to complete the loan. As I previously stated, ""Know Your Score"" Already said.

The Total Cost Is KING - If you have poor or damaged credit, it's likely for this straightforward reason: At some point, you owed more money than you could pay out, and the situation deteriorated. Typically, this type of past is accompanied by a lack of funds or inadequate monthly income sources. Consequently, you begin to manage and consider all financial decisions in terms of a monthly payment. This is not inherently a bad practice, but keep in mind that your auto loan will carry a fairly high annual interest rate. This can blind you as you evaluate your needs for a new automobile. Monthly payment... Monthly payment...this is your typical refrain as you approach a car dealership. However, this is also the salesperson's catchphrase. This is problematic, and here's why: You should be interested in negotiating the total price because that is the only way to save money in a meaningful way. The dealer is interested in negotiating the monthly payment because it distracts you from the fact that they are not offering a discount on the car's price. It also distracts you from the fact that the majority of your monthly payment will be interest and only a small portion of the principal balance. If you are even slightly interested in saving money, which I am certain you are, then you should focus on the only area where you can actually do so: the total price of the vehicle, not the monthly payment."""