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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 totaled 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.

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.

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.

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.

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.

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.

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.

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.

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.

A discharge in bankruptcy is when there is no more enforceable debt against an individual.  In Chapter 7 bankruptcy, this happens almost immediately since all debt is forgiven.  For Chapter 13 bankruptcy it can take up to 5 years, since the individual must repay their consolidated debt.  Once the person has been discharged from bankruptcy they will be able to start rebuilding their credit and will receive better financing terms.

People are forced to file for bankruptcy when they are not able to pay back the debt that they have accumulated.  When they file, there are two different options on how to file.  If they choose to file under a Chapter 7 bankruptcy all of their debt is forgiven and they start with a blank slate.  If they choose the Chapter 13 option, their debt will be consolidated to a monthly payment that they can afford.  Generally a lawyer will advise you whether you can file for a Chapter 7 or a Chapter 13.

Bankruptcy is a federal court process that is designed to help individuals and businesses eliminate or repay their debt.  This is done under the protection of the bankruptcy courts to ensure both the debtors and the creditors are treated fairly.  Once filed, a bankruptcy will either eliminate or reorganize the debt.  Bankruptcy has many rules and exceptions to those rules.  An experienced bankruptcy lawyer will be able to tell you if you are eligible to file for bankruptcy.

The first thing I always tell a client is that they should always get a vehicle history report, regardless of who it is from.  It is far more important that you simply get one than that you get it from a certain company.  However, when asked which service I prefer, I generally go with AutoCheck.  Generally the company has better accident reporting, is easier to understand and costs less.  The report lists accidents 200 days ahead of industry average and is used by 95% of auctioneers.  A single report costs $34.99 with CarFax and only $29.99 with AutoCheck.  For multiple reports, CarFax gives you 5 reports for $44.99 while AutoCheck gives you unlimited reports for the same pricing.  The differences between the companies are marginal but a better deal is a better deal.

When using a service like autocheck.com or carfax.com, it is important to know what you are looking at.  The first thing you’ll want to do is make sure that all the vehicle information matches what you’ve been told.  You’ll then want to ensure that there are no problems with the title and it is not branded.  If there is an odometer reading you will want to check that it is close to what you expect.  There should then be a section on whether the vehicle was used as a rental, taxi, police or other type of vehicle.  You may want to think twice about a vehicle that has been used in one of these high use areas.

The next section will cover if the vehicle has been in any accidents.  An accident is not necessarily bad but you will want to verify it was properly repaired.  You will also be able to see the report of who owned the vehicle and where.  This isn’t 100% accurate but generally the fewer owners, the better.  Finally, if there is any information about whether the vehicle passed emissions testing, that will be on the report.

A brand is put on a title for a car that has been severely damaged such as with flooding, salvage or serious accidents.  Once a brand is put on the title, it will be like that forever.  This is important to know because a lot of private sellers and small lots will try to sell you these vehicles as if there is nothing wrong with them.  Then, when you try to trade in or sell your vehicle later, you will not be able to get the full value due to the title.  Make sure you always use vehicle history reports such as autocheck.com to ensure you do not get a car with a branded title.

It is important when you are looking at a used car to know the previous history.  Getting a written vehicle history from a legitimate company like www.autocheck.com or www.carfax.com is the best way to find out what you are buying.  The reports give official information on accidents, where the car has been registered, how many previous owners… so that you are able to make an informed buying decision.

The reason I put so much emphasis on tires is both personal and professional.  After driving a company car that was maintained for me for most of my driving years, I went to a personal car.  One winter I was slipping and sliding in the snow so bad it was lucky I was not in a bad accident.  A friend looked at my tires and showed me they were nearly bald, with no tread whatsoever.  After purchasing new tires, my car drove and handled, much safer.

When customers have drivability issues, many times it is the tires.  Most of the cars traded in need new tires, decreasing the trade-in value.  For safety and mechanical reasons, good tires suited for your driving needs are very important.  Many mechanical problems would be alleviated if people kept their tires rotated and replaced them when needed.  Even if you may be trading your car “in the future” do not ignore your tires.  A good resource is: http://www.nhtsa.dot.gov/cars/rules/TireSafety/ridesonit/brochure.html

Often I am asked this question and my response is pretty simple.  The most important things you need are a valid drivers license, verifiable income in the amount of $1800 a month or more and a down payment determined by the lender.

To verify employment income, the lenders accept a recent pay stub.  For fixed income like Social Security or pension, that is direct deposit, they generally accept a bank statement from the last 30 days.

The down payment varies according to your credit and the price and value of the car.  A few years ago, when credit was easier, down payments could be waived by picking a car with a lot of value.  Recently, down payments have been averaging about $1500 for customers with credit issues.

If you do not have  these  things, the lenders may consider a cosigner.

Previously, if a customer did not have insurance and wanted insurance when purchasing or financing a car, they were considered higher risk.  Insurance companies either charged them more or would not consider them at all without prior insurance.  Effective November 1st, 2009 insurance companies can no longer classify people as high risk due to lack of insurance.  Since drivers will be required to have liability insurance in a few months, you may want to start looking into it now while you have time to research the best policy and price for you.

The State of Wisconsin changes that began November 1st 2009 raise the minimum limits for uninsured motorist from $25,00/$50,000 to $100,000/$300,000.  Underinsured motorist was optional with coverage of $50,000/$100.000 and is now mandatory at $100,000/$300,000.  Medial payments went from $1,000 to $10,000 although they remain optional.

January 1st 2010 liability coverage increased from $25,00/$50,000/$10,000 to $50,000/$100,000/$15,000.  This means, in the event of an accident, $50,000 is paid to any one injured person with a maximum of $100,000 to all people injured.  $15,000 is the maximum paid for property damage.

Understanding what is required and what it means to you is important when choosing the right insurance policy.  The Wisconsin COmmissioner of Insurance website has a section with frequently asked questions on auto insurance: http://oci.wi.gov/faq/auto.htm#finresp

If you are going to be late on a payment, the first thing you should do is contact the lender as soon as possible and explain your situation and ask if there is anything they can do to help.  Generally they will want to know why you are late and if this is a short or long term issue.

Thinking about what you will say in advance and making sure you have the fact and are not upset with the lender is important.  The situation that occurred may not be your fault, but it is not the lender’s either and it is your responsibility to meet the terms of the contract.

If you have had the loan for a while, generally at least a year, you may qualify for an extension, putting the payment on at the end of the loan and extending the original term by one month.  You may be able to make an interest only payment.  You may be able to refinance and redo the original terms of the loan and extend the term.

The most important thing is to be in touch with the lender.  Call them before the payment is late and explain.  Do not wait for them to call or avoid their calls.  Lenders make notes and whether you are cooperative or not will be in your file and may influence the options they give you in this instance or the future.

The web definition of fresh start is: an opportunity to start over without prejudice.  If you have had bad credit in the past and are given an opportunity to open a line of credit, this is your chance to start over.  A new loan is an opportunity to begin again and be a success by making payments on time.

You can ensure the terms of the loan are met by carefully reviewing them and making certain they are within your means and that you understand the agreement you are signing.  If you are in doubt you will be able to complete the contract as agreed, you should modify the terms: put more money down, finance less….

This loan has nothing to do with your past credit and can serve as a springboard for your future credit so please take it very seriously.  The lenders only give so many “second chance” loans and if they see a customer consistently does not pay on time, they just say no.  Particularly in a tough economic climate like we are experiencing now, Fresh Start Loans are not a given, are much hard to obtain and should be taken very seriously by the person taking the loan.

Beginning June 1st, 2010 liability insurance will be required in the State of Wisconsin and you must carry proof of insurance with you.  The police and sheriff’s department will be enforcing this law if you are in an accident or receive a ticket for a driving violation.  Drivers without insurance are subject to a fine up to $500.  If you do not have proof of insurance with you, you will be able to provide it later and pay a $10 fine.  If the proof of insurance provided is fraudulent, the fine can be up to $5,000.  A printable guide, explaining the changes, can be found at: http://www.insuranceinfo-ciic.org/Auto_Changes2009_small.pdf

Having your car washed on a regular basis makes your car look nice now and in the future, maximizing the value at time of trade in.  Dust, sand, bird droppings, tree sap, and salt can permanently scratch or eat through the clear coat and paint on your car.  Going to a car wash, whether is is self-service or drive thru, is the best for the environment because the chemicals used in the soap when you wash your car in the driveway end up on your driveway or in the street and may be toxic to the water supply and wild life.  Using proper towels and products for automobiles when it is washed are also important to retaining the finish and not causing scratches or damages.  For more details visit: www.carwashing.com.

Sometimes.  When customers have an excessive amount of inquiries they are considered a higher risk.  Lenders look at who is reviewing the credit and take that into consideration when making a decision.

The following is a list of "drivability" signs of tire wear:

1. Car does not stop or turn well on wet or snowy roads

2. Vibration when you are driving

3. Tires sound loud or rumbling when driving

4. Frequent loss of tire pressure

In general, 6 inquiries per year are fine.  As an example, when applying for auto financing you may have three inquiries in just a few days from the lenders and auto insurance carriers and that would be considered normal.

The following is a list of visual signs of tire wear:

1. Bulges in the tire
2. Wear bars (strips of smooth rubber across the tire tread)
3. Check the tread grooves for cracking
4. Check the tire tread and sidewall for punctures, cuts or separation

To check the tread wear: insert an upside-down penny.  If the tread fails to reach the top of Lincoln’s head the tread is worn.

Yes, they can but it depends on your credit history.  Inquiries have the biggest affect when a customer has very little or no credit.  With established credit history it is estimated that an inquiry affects the score less than 5 points.

As spring arrives and the temperature starts to rise, the pressure in your tires will change approximately 1 pound of pressure for every 10 degree swing in temperature.  We recommend checking tire pressure with a digital gauge once a month or more frequently when there are major variations in temperature.  Keeping tires properly inflated will maximize the life of the tires and your gas mileage.  For additional information visit: http://www.ehow.com/how_1865_check-add-air.html

When you apply for credit and other things like auto insurance, the company you are doing business with will request a copy of your credit report from one or all of the credit reporting agencies TransUnion, Experian or Equifax.  Every time a lender gets a copy of your credit report, their inquiry and the date they obtained the report will be listed on your credit report.  Inquiries stay on your credit report for 2 years.

Rotate your tires on a regular basis to even out of the tread wear.  The benefit is your tires will last longer and you will get maximum performance from the tires.  An easy way to remember is to rotate your tires when you have your oil changed.

You may not spend much time mulling your debt-to-limit ratio, but it weighs heavily on your credit score and can determine your ability to get a loan.  That is because your debt-to limit ratio or “debt utilization,” is a key component of your credit score.  Your debt-to-limit ratio is calculated by dividing what you’ve spent by your total credit limit.  If you have a $5,000 limit and you’ve charged $4,000 this month, your debt-to-limit ratio is 80%.  Experts recommend keeping your debt-to-limit ratio under 30%.

When you get a car loan, the lender wants to ensure that you will be able to make the monthly payments.  To determine this, they look at how much money you earn every month.  Then the lender compares how many bills you have so they know how much of the extra money can be spend on a car payment.  As a general rule, lenders will allow 12% of your monthly take home pay to be used for a car payment.  So, if you are bringing home $2,000 a month they will likely approve a monthly payment of around $250.

Unpaid delinquent accounts are collections, judgments, liens, charge offs, repos or foreclosures that show up on your credit report.  They state that you have an amount of money that you still owe someone.  While it would seem to make sense to simply pay these off as quickly as possible, be careful.  Many times collection companies will only stop contacting you and will not mark the account as “paid” or remove it from your credit report.  Request that the company agrees to delete the listing, not just mark it as paid.  Get this in writing before you pay anything.

It can be difficult to decide what kind of vehicle you want to purchase.  In order to do this, start with the basics.  Consider what the most important features are that you want to have.  Then look at whether you want a 2 door or a 4 door.  Also consider how many passengers you carry, whether you want automatic or manual, what you liked most about your last car and what kind of payment you can afford.  From there you will be able to narrow-down what kind of vehicle to get.

If there is information on your credit report that you do not agree with, you have the right to dispute this information.  Please be aware that the only two disputes that credit reports will hear are “its not mine” or “it wasn’t late”.  Once you have told them this, they will contact the company the reported the information.  That company has 30 days to respond or the information will be removed from your report.  This is not the easiest thing in the world but if you have a valid claim, it should come to light.  To file such a dispute, visit the credit bureaus’ websites: www.equifax.com, www.experian.com, www.transunion.com

In order to verify your monthly income, the lender may look at your most recent pay stubs, or your most recent tax returns.  The lenders usually factor child support, disability or other types of additional income that that you receive into their calculations and sometimes require verification because it is income you receive.  Lenders will sometimes verbally verify employment with a supervisor or human resources contact.  It will help you to have the phone number and contact person at your company who verifies employment as well as the date you started working there.

There are three companies that report credit scores to lenders: Equifax, Experian and Transunion.  They all provide relatively the same information but sometimes one will have information that others do not.  This is why it is important to pull all three credit reports.  You can get these reports for free once a year at: https://www.AnnualCreditReport.com.  You can also receive the report by phone or mail: 1-877-322-8228 or

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

When trying to get a loan to buy a car many lenders like to have a down payment on the vehicle.  In their eyes, this shows that you have a commitment to the equity in the vehicle.  Generally a lender likes to see a 20% down payment towards the loan.  The good news is your down payment doesn’t all have to be cash if you have equity in your trade in.  A down payment is good because you are effectively reducing the amount of money you have pay back which translates to a much lower monthly payment!

Since credit determines the likelihood that you will repay a loan, good credit is required to get any type of consideration on borrowing money.  Each type of loan will have different requirements to get the money you need, but just about all loans will look at your credit score.  Because the rate of interest that is charged is determined on your creditworthiness, it is a good thing to maintain the highest credit score possible.

Your credit, as it is rated by a “Beacon Score,” or “FICO score,” is really a computer’s best guess on how likely you are to repay a loan.   The higher your credit score on the report, the more likely the computer thinks ( and so will the lender) you will repay a loan.  Any late payments, collections, liens, judgements, bankruptcies, foreclosures or repossessions will reduce your credit score.

A big part of buying a car is having good credit so you can get a loan.  There is a lot that can go into making sure you have good credit so I want to help you fix, maintain and grow your credit.  If you ever have any credit related questions, please just let me know.

Another important consideration when looking to purchase a vehicle is insurance.  Almost all lenders require insurance on vehicles that they finance.  This is simply to protect their investment should something happen to it.  What is important to note though is that liability insurance is usually not enough.  Liability only covers damages of other vehicles and properties and most lenders want you to have collision and comprehensive coverage, which covers your vehicle in an accident.

Even though Wisconsin is enacting new insurance laws, these laws still only apply to liability, not collision and comprehensive.  We are not saying that you need to purchase insurance before you show up but it may help you to research different insurance companies before you arrive.  Otherwise, we will help you select the insurance that is best for you.

Make sure that your driver’s license is valid.  If you are not sure you can access the motor vehicle department online here: http://www.dot.wisconsin.gov So pull out your wallet and take look at the expiration date.  Double check that your name and address are correct and up to date.  If you have moved or changed names, lenders will prefer that the information on your license matches where you currently live and how you are referred to.  Having these items verified saves a lot of time in getting your car loan processed.

Some of the ideas that I mention are pretty basic to veteran car buyers, but with my experience over the years I find that everyone needs a little help on sorting out what is required to buy a car especially when financing is needed.  After all we don’t buy a car every day of the week.