Avoiding bad credit auto loan scams
Car buyers who suffer from credit challenges can potentially save hundreds of dollars by simply following some basic advice. The simple truth is that people who are credit-challenged need to do their research and make smart choices when financing a vehicle with bad credit car loans. Otherwise, you take a chance on getting caught by bad credit auto loan scams. Don’t let this happen to you.
Here at Federal Auto Loan, we are intimately familiar with this situation. We specialize in helping applicants with less-than-perfect credit find dealers that offer bad credit, auto financing. And since our inception, we have helped thousands of people a month. We also have extensive content that is designed to keep you informed about bankruptcy issues, hot car topics, the bad credit car loan process, and quality auto financing advice.
Oftentimes, people get into trouble by signing for a car loan that they simply cannot afford. By adhering to the following guidelines, they might not be in the situation that they presently find themselves in:
Know your credit score. Before you ever set foot in a dealership, you should know at least one of your FICO scores and what is detailed in your credit reports. If you have a credit score above 640, you might be able to get a conventional car loan with a finance company, bank, or credit union. If you have a score that is below 640, you will typically be required to finance your vehicle with a bad credit, car loan. Since the conventional auto financing and bad credit auto financing processes differ from each other, knowing both your credit score and credit report is important.
Set a budget. The next step to avoiding bad credit, auto loan scams is to determine your car budget. In addition to car payments, this figure should include the cost of gas and full coverage car insurance. By comparing this number to your income after expenses – Federal Auto Loan offers an auto loan calculator that can help you with this – it will help you determine your payment to income (PTI) and debt to income (DTI) ratios. If everything goes as planned and desired, these ratios should meet the requirements of typical subprime auto loan lenders.
Research the price. Go online and look at the makes and models that you are considering. If you have a good idea of the price that you should be charged for a vehicle, it will be more difficult for a dealer to take advantage of you. Resources like Kelly Blue Book (www.kbb.com) and others can help you to know the amount you should pay for the car or truck you are considering.
Research interest rates. You can also research interest rates online to understand what you may be paying in terms of your rate. Remember that bad credit will significantly increase the interest rate you will have to pay. But, by researching first, you will have a good idea of the interest rate range you will be in. Then, if a dealer quotes you a much higher rate than the range you were expecting, you’ll know that something may be amiss.
Know the true value of your trade-in. If you don’t know what your trade-in is really worth, you can be taken advantage of. Make sure to research your trade online so you know what its value really is.
Have a vehicle inspection. You may not want to pay the extra money for a vehicle inspection, but if you are buying a used car without a warranty it may be the best money you’ve ever spent. Unscrupulous dealers may hide problems that you can’t discover in a test drive. So do yourself a favor and make sure the car you’re thinking about buying doesn’t have a hidden problem that will cost you money later.
Check vehicle history reports. Services like CarFax, InstaVin, and others allow you to get a history check of accidents and other information to make sure that the vehicle you’re considering doesn’t have hidden issues or problems that might affect the value.
Work with reputable dealers. It’s a good idea to research the dealership you are considering as well. Check with the BBB and other sources to make sure they aren’t conducting business in an unscrupulous manner. You can also check with your friends, family, co-workers, and others you trust before setting foot in a dealership. Not all dealerships are known for their good reputation and fairness when dealing with new and used car customers. Consumers with bad credit are more easily taken advantage of by unscrupulous dealers. So be sure to determine the reputation of a particular dealership before giving them your business.
Read your documents carefully. If you sign a document and something you negotiated wasn’t in the document, the loss falls to you. So, make sure you review the fine print and all the details. Don’t assume that the dealership will get everything right. People make mistakes… and dealers are people, too. Beyond this, unscrupulous dealers often use the documents to take advantage of unwary consumers.
Don’t buy back-end products. These are options that are offered (in most cases) by dealership finance managers as part of the finance process. They include window etching, tinting, rust proofing, paint protection, extended warranties, and gap insurance (and more). Of all the backend products, gap insurance is probably a good idea if you have a long-term (60- to 72-month or longer) loan and/or you have less than 20 to 25 percent to put down. Gap insurance protects you by covering the amount owed on the car versus its actual value after it’s been “totaled” in an accident. In addition, you may want to consider an extended warranty (assuming that it isn’t overly expensive) to help protect you from repair issues. On the other side, offers like window etching and tinting, under body rust proofing, paint protection and the like are typically not good deals.
Federal Auto Loan. The best way to avoid bad credit auto loan scams is to know your credit scores and be familiar with your credit reports. It is also a good idea to check up on your income and expenses to ensure that you meet the basic lender requirements before submitting a loan application. You should also know that if you have bad credit, you have more options available to you than you may realize. And, before you visit a dealer, you should give us a look first. Here at Federal Auto Loan, we specialize in helping people with bad credit find dealers that can help them get approved for bad credit auto loans. If you’re serious about rebuilding your credit and getting bad credit auto-financing, you can start now by filling out our online car loan application at www.federalautoloan.com.