Anyone buying a car is likely to use some type of personal loan, or a mix of cash and credit.
Personal loans can be what are known as either secured loans or unsecured loans, and when thinking of buying a car or a truck can be done directly with the manufacturers dealership, such as Ford, Nissan, General Motors etc, or with another institution such as a bank or a credit union. A secured loan is more normal when buying a car or truck, or any type of motor vehicle.
A secured loan means that the loan is based against the value of the car that it is being lent against. This means that in the event of the person taking out the loan defaulting on it or not being able to pay it back the car becomes the property of whoever lent the money and they can sell it in order to try and get their money back.
An unsecured loan is more common from banks and credit unions, and can be for any purpose at all subject to the approval of the lender. An unsecured loan does not have any collateral against it, and as such is likely to have a higher rate of interest than an unsecured loan, and generally less favourable terms and conditions such as the size of the down payment or the length of time of the loan period.
A personal loan that is taken out with someone such as Ford Credit or GM financial is for many people the most normal and straightforward way to borrow money to buy a new or used car, but as with all types of personal loans there are other options available, some long-term some short-term, some better than others !
Personal Loans and Payday Loans
Payday loans have a pretty bad reputation largely because of their huge interest rates, and are unlikely to be used when buying a type of car or motor-vehicle.
However some may consider them if they fall short during a particular month and had problems with your other commitments for their monthly repayment on a car loan. Payday loans market themselves as being a short-term solution to help bridge some temporary funding problems.
Whilst this may be true one sense, they can be hugely expensive to manage and should only be used as an absolute last resort. There are normally other options available including the option of refinancing the original loan should export first.
Personal Loans and Bad Credit Loans
Bad credit loans can be a real problem for a lot of people looking to buy or use any car or truck. People who have a bad credit history not only find it more difficult to obtain any type of credit or loans, but also more open to be exploited by people offering what may seem to be easy solutions.
The whole idea of bad credit is one that plays into the hands of people looking for some type of financial help us at the same time feeling grateful for any type of loan or credit offered however poor the terms and conditions may be.
The real solution is to really examine the nature of your credit report credit history, and take a longer-term view to re-establish a good credit reputation and manage credit for much more effective and beneficial way.
Personal loans and On-line Loans
The growth of the Internet has spawned a whole range of on-line loan companies and businesses, many of them offering supposedly cheap and easy solutions to anyone looking to arrange finance to buy a car or truck with a personal loan.
The problem with a number of these websites is very exactly who you are dealing with. If the website is a front for a legitimate bank or credit union than there should be no problems.
If it is a purely on-line company that can be trickier as they will our a considerable amount of personal and financial information from you in the first place by way of application, and in the event the application is successful, there may be problems further down the line in terms of contacting them and dealing directly with any personnell.
Personal Loans and Small Loans
Small loans may seem small at the time, but can quickly go if they are potentially payday loans is referred to above, where the interest on explode very quickly and turns what looks like a fairly small loan or advance in something actually quite huge. When considering a personal loan to buy a car or truck try and stick to auto dealerships such as Ford and General Motors, or the more traditional routes such as a bank or a credit union. If emergency cash is needed by and use a credit card if possible, or some other type of temporary bridging facility.
Personal Loans and Quick Loans
Personal loans that are advertised as quick loans often come under the same banner as small loans and payday loans.
The indication in the very name quick loans is that there will be an easy and quick decision made, can often appealing to people who have a bad credit history or who fear a lengthy investigation that finances prior to being able to borrow any money.
Any reputable leader be it Ford Credit or General Motors is likely to consider an application form reasonably quickly as it is no interests to come to a decision and let you know what that decision is. Anyone advertising an incredibly quick loan may do it quicker, but odds are they are likely to charge a much higher rate of interest or impose much less favourable terms and conditions.
No Credit Check Loans
Any loan provider seeking to entice custom by way of making a point that they do not carry out a credit check either has money to give away (which is unlikely !) or is in some way looking to attract people who are vulnerable because they have a poor bad credit history and believe that any credit check will simply stop them being able to have a personal loan.
Anyone with a poor credit history or bad credit looking to obtain a personal loan would do well to investigate their own credit report first, and do what they can to improve their credit score and then shop around.
Even someone with bad credit may well contain some type of personal loan from a reputable financial institution, even if the rate of interest is higher than it would be otherwise. In the long term this is likely to be a much more beneficial solution financially.
Personal Loans Low Interest Loans
Low interest loans obviously have an attraction, just be aware that there are normally other terms and conditions which will compensate for a lower rate of interest than would otherwise be the case.
Sometimes low interest loans are aimed at people who have an exceptionally high credit score, and are deemed a very good risk to lend money to. At other times, low-interest loans are affected subsidised by acquiring a much higher down payment, or a significantly longer period of a loan term.
The thing to watch for these type of loans is whether there is any penalty charge that may be incurred if the loan is paid off early, which can often be significant in terms of additional charges.
The idea of bad credit is something that can affect many people – knowing what it is and how to fix it can make a real difference when buying or leasing a car.
Key to understanding what bad credit means is understanding the idea of a credit report, and how that credit report generates a credit score that is then used as a guide by car manufacturers such as Ford Credit, GM Financial as to whether or not to lend you money and if so on what terms and conditions.
A credit score is essentially a number between a fixed range of two other numbers that gives a guide as to the credit rating agencies opinion about your creditworthiness. From this stands the notion of good and bad credit.
This idea of good and bad credit is to some extent true, but that is often a lot of flexibility in the system that means the numeric idea behind it should not be seen as too rigid.
Bad Credit – FICO Sore and Vantage Score
Fico is perhaps the most well-known scoring system, the other one that is also widely used is the vantage score.
Both systems use a scoring range of between 300 and 850, with the ratings system adjusted accordingly, implying that a score that is bottom to mid of this range is poor or bad credit, whilst a score ranging from the middle of the range to the top is a good or excellent score.
Naturally people look to the scoring system as almost an exact science, and whilst it’s understandable it can also be used to literally.
Whilst the scoring system is used to determine creditworthiness, a lender will often take other factors into account on the individual situation, and will also base their decision differently depending upon what the money is to be used for, and whether or not the loan is a personal secured loan or an unsecured loan.
In reality, there is also quite a lot of negotiating that can be done around the idea of a car loan, given the different components of a down payment and length of term of the loan, and options such as having a cosigner guarantee the loan.
Bad Credit – What Impacts a Credit Score
The main credit bureaus will have slightly different assessments of how to generate a credit score, and different lenders will use a credit score and relating information differently. However, there are a number of factors that affect a credit score.
Wells Fargo have given the following formula as a guide, and it is useful as such. According to them 35% of your score is based on your payment history, 30% is based on current debts, 15% is determined by your credit history, 10% is allotted to new credit applications and 10% is about types of current credit.
A lot of what affects your credit score is common sense, and anyone with a bad or poor credit rating would do well to understand the mechanics of credit and do what they can to improve their credit report and subsequent credit score.
Bad Credit and No Credit.
People often assume that these two are the same thing as a fact they are not. A lot of young people started off a working life will have no credit history, and as such may be penalised unfairly when applying for a car loan or any other type of unsecured loan or credit agreement.
But are however a number of banks and financial restrictions will appreciate the difference between bad credit and no credit and make adjustments accordingly.
Anyone who is relatively young, say under the age of 25, and is looking to buy a car is going to be hit by significant insurance costs in addition to the cost of buying or leasing a car, and the idea of a cosigner can be a hugely beneficial addition to the whole process.
A cosigner will essentially take responsibility for making sure the loan is paid back, and they will be liable for the outstanding amount of the loan if payments are missed or repayment is not able to be made. Obviously this is quite a significant responsibility for the cosigner, and is normally done either by a parent or guardian or some other family member.
The advantage of a cosigner is at it allows someone else to buy or lease a car at a much more reasonable rate, and allows them to build up a credit history in their own right.
Improving Bad Credit
Anyone who considers themselves have a bad credit score would do well to do what they can to improve it. The first port of call is to obtain a copy of your credit report, and see what information is in there. Check that the information is accurate, and that any out of date information is removed.
Certain areas of inflation have a time bar on them as to how long they can be included in your credit report and you should be checked and removed as necessary. The other things that you can do all relate to improving how your credit is viewed by credit bureaus.
The sort of things they look for are prompt payment of bills, some type of regular payment history regarding to all direct debits and use of available credit. Taking time to update payments and clear debt can make a real difference.
In addition, doing things such as building up a positive credit history can help, although it can also take time. Having additional credit cards and personal loans that are secured can show a pattern of behaviour that demonstrates responsibility regarding money.
Having said that it is important not to take on additional debt or loans unless you have sufficient ability to repay them, otherwise she simply end up with a worse credit history than before. It is often possible to obtain credit cards that are either known as secured or pre paid.
A secured credit card me that is is essentially guaranteed against some type of deposit that you hold, often in a bank account. A prepaid credit card means that you have two load it with a certain amount of money before you’re able to use it, I can only use it to the extent of the funds secured on it.
Whilst both of these are a bit cumbersome, they do mean that you are able to use the basis of credit cards as a way of securing an improvement in credit history, and overcome some of the problems associated with bad credit. U
Refinancing a car with bad credit can be as easy or as difficult as getting the original loan with bad credit. Perhaps the most important thing that needs to be said that anyone who has what is deemed bad credit is not to be lured into some of the more sales orientated offers, either by a lender or a auto loan broker, who promise wonderful deals either at low interest or specially reduced rates.
Anyone who has bad credit needs to realise that if there are any special deals offered that seem too good to be true, they probably are. Some lenders will try and induce people with poor credit into a loan at what seemed to be preferential or good interest rates, but stack certain other things against them such as balloon payments at the end of the loan, certain fees they charge for documentation etc. If a lender is offering a particularly good interest rate someone who has bad credit, then there is a fair chance that are making up their money somewhere else.
Refinancing a Car with Bad Credit
Bad credit can mean different things to different people, and it is important for anyone who considers themselves to have bad credit to first and foremost get a copy of their credit report, and check to make sure that the information in it is accurate and up-to-date. Certain information I can have a major effect on a credit score normally has a time limit on it regarding how long it can be used within the credit report of what has to be removed.
Once removed the credit report will reflect that and will improve their credit score. Refinancing a car can often make a lot of sense, and if someone is in a position with bad credit it is certainly well worth shopping around to see if they can get a better deal, at the same time it is worth doing what they can to improve their credit report, and once that is improved approach to 4 lenders on the basis of a new and improved credit score which should be able to secure a better refinancing car loan deal.