The bad credit car loan process
The bad credit car loan process can be tricky and confusing, if you don’t approach it properly. First and foremost, you’ll need to have a couple personal items available to you when applying for a bad credit auto loan: your credit history and your credit score (sometimes called a Beacon Score or a FICO Score). Your payment history and credit score are two critically important elements in determining the type of loan you qualify for, whether you qualify for a prime, near-prime, or subprime loan (also known as a bad credit car loan).
The next step in the bad credit auto financing process is to get some sort of idea as to what kind of vehicle you would like to purchase. You’ll want to have a general idea as to what size of vehicle you want, the performance of that vehicle, and how that vehicle (and the payments associated with it) will fit into your overall budget. It is generally a good idea to choose at least two different car models and test-drive them both. A new car is no small purchase decision… and you want to be sure that you are making a car choice that you’ll be happy with and won’t put you into financial difficulties.
Once you’ve determined the type of car(s) you want to test-drive, you’ll need to determine what “options” you want to be included with your vehicle. You’ll also want to figure out the suggested retail price, or MSRP, as well as the dealer invoice price associated with the car(s) you are interested in. It is also a good idea to check and see if there are any consumer or cash-rebate programs available. These options can further reduce the selling price of your vehicle and the amount you have to borrow with a bad credit, car loan. Also, if you are considering trading in your current vehicle… you’ll want to research its current market value to ensure you get a fair trade-in price for it.
When the time comes to negotiate, it is always a good idea to keep the vehicle and trade-in negotiations separate. The “difference amount” is key in any transaction involving a trade-in. The lower the “difference amount,” the lower your monthly payment will be. Because of this, you’ll want to make sure you have researched what your trade-in is worth so you can make sure you get a good deal on your trade. Keep in mind that the dealer isn’t interested in paying full retail on your trade because he or she won’t be able to make any money on it when they sell it later. So, if you want to get full value for your trade, you will probably have to sell the vehicle yourself.
Finally, and most importantly, don’t take your “eye off the ball” until you’ve completed the last stage of the car loan process – the paperwork. And, keep in mind that you are not always signing a contract with the dealer when taking on a bad credit auto loan… the dealer is often acting as an “agent” for the lender. Double-check all negotiated items.
If something that you negotiated for during the car-buying process is not included in the contract, then it simply does not exist! And, since there is no “cooling off period” for a bad credit car loan, this means that once the final papers have been signed, the deal is final. It is for this very reason that it is always a good idea to take some time and read over all of the paperwork before you sign on the dotted line of an auto loan agreement. Make sure that everything contained in the loan paperwork matches the terms, and deals, that you agreed to. Lastly, make sure that you get a copy of everything that you signed BEFORE you leave the dealership. It is always a good idea to keep records of any financial transaction. Because cars are an expensive purchase, it’s especially important to keep your paperwork on a car deal.