It is a buyer’s market!

  With “tax time” here, good news for customers looking to purchase and finance vehicles:  the banks are looking to lend money and the dealers want to sell cars.  It is definitely a buyers market!

  The banks are loosening up and approving more customers than they have in years.  They have money to lend and have lowered the requirements.  New banks have come in the area building relationships with car dealers by looking for reasons to approve loans rather than turn them down, staying late after “normal” banking hours, lowering downpayments even when the credit is bad and approving larger loans.

  It is about time!  I am so happy to be able to help customers get what they want to drive, rather than settle for less because the bank is limiting the amount they are approved for.   Lower interest rates and longer loan terms reduce the amount of the monthly payment.  The banks have relaxed the qualifications required so more people qualify.   It has allowed me to give customers with bad credit, bankruptcy, and lower credit scores a fresh start with a new car when  just a few months ago they would have been turned down.

  If you are driving an older car that needs work, rather than put extra money in it to keep it running, explore your options to use that money as a downpayment and get something that is newer and reliable.  The results may surprise you!

When you sign for a car loan, it IS your car loan

   Many times when customers have had bad car loans it is on a car that was purchased with someone else like a child or spouse or brother or sister…  When you sign for a car loan it is your car loan.  It does not matter who was driving it.  If there is a divorce, it does not matter if the court says the other party is responsible.  Once you have signed, whether you were the primary or secondary signer, you are responsible to get the loan paid on time and for the full balance.

   It does not matter whether you have ever driven the car, if the car breaks down, or if the car is totalled out and the other person was supposed to pay the insurance and did not.  When you sign on a car loan, you agree to pay the lender for the amount you finance plus interest for the term of the loan.  You can pay off the loan early, but if you or the other person pays late, it will affect your credit and it is your debt.

   Think twice before signing.  Be prepared to pay the loan.  If you are struggling to pay your own bills, then you should not sign with someone else on another loan. The loan will affect your credit score.  If the loan is not paid on time, the lender has the right to garnish your wages for the remaining balance.  It will affect your ability to get future loans.  Other lenders will base their decision to grant you credit on the performance of this and every loan you sign for.   It will affect your relationship with the other person forever.

A customer’s experience with a payday loan.

   I am working with a customer that has a car with a payday loan on it.   She purchased the car from a private party and  had unexpected repairs so she took out a payday loan to pay for the repairs.  She borrowed $2,000 and has been making monthly payments of $450.  She still owes $2,000.  All she has been paying is interest. 

  She wants to trade the car in, but the payoff on the payday loan is more than the car is worth.  If she does not trade the car, she will have a car payment on the new car as well as the payday loan payment of $450 per month, which she can not afford.  If she does not pay the payday loan payment, her check will be garnished until the loan and court costs are paid – a very long time and she will not be able to pay the payment on the car she is purchasing.  She has not been able to set any money aside for a downpayment on a new car because the payday loan is so high.

   There is no easy solution.  Think twice before taking out a payday loan.  I went online to check the current interest rates on payday loans in the area and was shocked to see 651.79% and 573.57%.  This is not a misprint!  I could not believe it!  Interest rates over 500%!  People would be better off trading their old car in on a newer vehicle that has been inspected by a reputable dealership than taking out a payday loan to fix an old car with a lot of miles.  Please do your research, ask questions  and explore all options before taking out “quick”  loans like this that are nearly impossible to pay off.

Don’t have a repossession after a bankruptcy!

   Please be careful what you buy after you are discharged from bankruptcy.  Make sure the auto loan payment is in line with your income.  Do not exceed 10-15% of your monthly income.  Work with a dealership who cares about your success and is not just trying to sell you an expensive car!

   I worked with a young man this week whose income is about $2,000 per month.  He went to a dealership that sold him a $16,800 car and the loan had a payment of $486 per month.  His insurance was an additional $200 per month and he was unable to pay it, so the lender repossessed the car just months after his bankruptcy was discharged.  Now he has a balance of $17,600, which is more than he borrowed due to interest, that is unpaid and rated I-9, the worst rating possible and no transportation.

  He thought if he was approved for it, he would be able to pay it.  When the lender took it back, he thought he could go out and get another vehicle.  Unfortunately, no other lenders will consider him for financing.  He not only has bad credit after the bankruptcy, because of the amount owed he has too high a debt ratio to be considered for another loan.  The banks consider that amount in his debt ratio.   Bad credit after a bankruptcy is very hard to overcome.  Auto loans, credit cards, bad credit of any kind is considered worse after a bankruptcy is discharged than at any other time.

    You are ultimately responsible.  Your future credit depends on how well you reestablish.  Work with someone who cares about your success and is not just trying to sell you something.  Make sure you understand the cost of what you are buying.  If you do not understand the terms of a contract and your responsibilities, do not sign.

Do unpaid collections affect my debt ratio?

  Unpaid collections can affect your debt ratio depending on the lender reviewing your credit.  In some instances the lender will total the collections and take 10% as a monthly amount. If you owe $20,000 the amount would be $200.  Some lenders ignore collections depending on the source.  The most commonly ignored collections are medical.  Customers are better off voluntarily paying collections and not having them deducted directly from their paystub.  Collections can remain on your credit report for 7 years from the time of service or the last contact you had with the company.

Why do I need a pay stub to prove my income?

   I get asked this question often.  The lenders that finance cars for customers with bad credit initially verify income by pay stub.  The pay stub gives them important information regarding year to date income, hours worked, deductions and garnishments.

   The lenders want to make sure there is enough income to cover living expenses(rent, mortgage, utilities), payments showing on the credit report, as well as the new car payment and insurance.  The pay stub provides an accurate picture of monthly income, which is calculated based on the gross year to date income divided by the number of months worked based on the ending pay period of the check stub.  If the job was started after January 1st or if the employee  was unable to work for part of the year, this must be figured in the income calculations.

   The lenders need to know you can make the payments, so it is very important to have a current pay stub with all time off during the year accounted for.  Although the lenders may also call your employer and verify verbally, they require a recent pay stub on the vast majority of bad credit auto loans to determine the amount the will finance based on a monthly payment they will approve.

Why don’t Bankruptcy Attorneys explain the process?

Lately, every customer I work with who has filed bankruptcy thinks that once it is filed, the bankruptcy is done and they can get a car.   There is a process, yet the customer is not aware of it.  Once a bankruptcy is filed, the customers get a court date and after the court date the judge will discharge the bankruptcy.  In between, there are required classes and predetermined lengths of time.  The attorneys who are being paid to handle the bankruptcy need to explain the process, classes and expected time from filing to discharge.

The time to complete a bankruptcy is quite a bit longer than it used to be.  Back in the day, it seemed that customers could file and be discharged within two to three months.  Recently it is taking much longer.  I am continually requesting customers contact their attorney for an estimate on time to completion.

Just because the customer has paid the attorney and the bankruptcy has been filed does not mean the bankruptcy is done and the lenders will approve credit.  I wish the attorneys would explain this better.  If I run into this often, twice today, how many uninformed people who have paid a lot of money to a professional, are out there?  I believe the attorneys should have to explain this completely before taking the customers money.  Does anyone have additional insight on this?

If you have questions, use our Contact Form to contact me.

I have unpaid bills, can I get a bad credit auto loan?

Yes you can get an auto loan, even if you have unpaid bills.  The lenders that specialize in financing cars for customers with bad credit understand that although you owe money for unpaid bills, you can still make a car payment.  As long as the bills are not excessive in relation to your income, you will still qualify for an auto loan. Go to our credit application and start re-establishing your credit now.

What is a bad credit auto loan?

   Credit is considered “bad” also know as “subprime” when it is below the “prime” lending standards traditional lenders like banks, credit unions, or captive lenders (for example the manufacturer’s finance company) use. Generally a credit score below 620, very little or new credit, bankruptcy within the last 2 years, late payments, collections, judgments, repossession, foreclosure, back child support, unpaid student loans is considered bad or sub prime credit.

A bad credit auto loan is an auto loan for customers with sub prime credit. The lenders have more flexible credit standards and will work with low credit scores, recent bankruptcy and past due credit. Generally these lenders use other guidelines like time at the address, time on the job, verifiable income and are more understanding that bad things like illness and medical bills, loss of job, divorce… can be a factor affecting the credit.

Can you buy a car if you have not been discharged from bankruptcy?

The short answer is yes.  However, it may make sense to wait until you have been discharged because you are going to pay a much higher financing rate.  For people that file a Chapter 7 bankruptcy, I almost always recommend they look for alternative transportation for the couple of weeks it will take to discharge.  If customers need help finding options, I am always happy to help them.  However, for people that filed a Chapter 13 bankruptcy, which can take up to 5 years to discharge, we are able to help them find a vehicle that will suit their needs.  If it is possible to wait I generally tell people to try to hold out but if a new vehicle is absolutely necessary, a bankruptcy is not a reason you cannot buy.