Finance Tips

Car loans after a bankruptcy is one of the first secured loans you will qualify for. Not only will you obtain transportation with a car loan, but you can also rebuild your credit. The following three facts will help you get the best financing deal.

1. Seven Years Doesn’t Mean Seven Years Of No Credit

Bankruptcy doesn’t mean that you can’t qualify for credit for seven years. After a few months of reestablishing your credit, you can apply with a subprime lender for vehicle financing. With a good credit record of two years or longer, you can look at conventional lenders.

Subprime lenders work with non-traditional borrowers. With their slightly higher rates, they can offer a variety of financing options to people with all sorts of credit records. Conventional lenders also look at people with bankruptcy once they have regained a good credit score.

2. Lenders Offer Different Rates – So Compare First

Lenders offer different rates from the market index. By comparing the APR, which also includes any fees, you can find the lowest costing loan. This doesn’t always mean the lowest interest rate.

Another way to reduce your rates is to increase your down payment to 20% or more. A large down payment reduces the risk of default, enabling lenders to provide better rates.

Rates also vary by the type of vehicle you purchase. New cars purchased from a dealership qualify for the lowest rates. But budget considerations, such as vehicle price, should also be considered in choosing your car’s financing.

3. You Can Refinance Car Loans

Once you sign a contract for your car loan, you don’t have to feel trapped by the rates. Today’s lenders offer refinancing options for car loans. Even if rates go up, you may find that by improving your credit score, you will qualify for better rates in two years.

If you plan on refinancing, make sure that your current car loan doesn’t have any early payment fees. Also, be aware that the majority of your interest is paid at the beginning of your loan. Waiting too long to refinance may not save you any money, so check the numbers first.

Reasonable car loan rates can be found by researching and planning ahead.

If you have a low credit score for any reason, whether it is because you failed to repay debts on time or because of human and other errors in your record, you will find that most conventional lenders will refuse to lend you cash. However, subprime lending companies that offer car title loans can help consumers with bad scores, especially in times of emergencies.

A history of defaulting on payments is one of the reasons that will cause the credit bureaus to lower your rating. For consumers who are excluded from borrowing money at low interest rates, it’s a Catch-22 situation. If you can’t get a loan from banks, how do you repay your debts and improve your FICO score?

One way out of this dilemma is to apply for a car title loan from companies that primarily work with borrowers who have bad ratings, regardless of the reasons for the low score. Because they accept your car title as collateral, these companies do not consider a bad rating a deal-breaker.

So if you need money immediately and are willing to pay a higher interest rate than what a conventional lender will charge, you can turn to a car title loan lender for help. Having a low score does not automatically disqualify you for a car title loan; because your vehicle provides the lender with sufficient collateral to cover their costs should you default on your payments.

Improve your Credit Score
Each time a borrower makes a regular payment, or fails to make a payment on time, their record will reflect that fact. Here are some steps that you can take to improve a low score.

* Credit report errors: How can they be fixed?
A yearly copy of your credit report could be requested from the three credit bureaus and get them checked for errors. If you find erroneous or missing entries, contact the agency and creditor directly and fix any mistakes on your report. However, this is a long, drawn-out process that can take months or years.

Credit Card Debts To Be Payed Off
To reduce your debt you can start paying off debt or you could move debt from a nearly maxed-out card to a one with more available credit. This will reduce your debt. Maxed-out cards will hurt your FICO score.

*Avoid Applying For Fresh Loans
Before approving your loan your car title loan lender will run a mandatory credit check on you. Every time you apply for new loans, this fact will show up on your record. By taking a break from applying for new loans, you can avoid inquiries into your history.

* Make your payments for open credit on time
Your lender will report your track record of paying back the loan to the credit agencies. By repaying a loan on time and as per the schedule in the agreement, you can establish a positive payment history that will be a good mark on your record. However, defaulting on payments can hurt your rating even more.

You can improve a low FICO score by making regular payments on your car title loan. In this way, it is possible to improve a bad rating so that you can eventually qualify for a conventional loan.