When tracking down a lender for a new car, it is important that the new car shopper know a few things before diving into the car loan market. Since each lender has its own criteria for lending money and will make decisions based on certain minimum standards established by both the lending agency as well as local and federal laws. With legitimate car loan financing, the conditions for borrowing money come as no surprise as these are, without exception, outlined in brochures, web-based documentation, and directly on the loan applications. Even where it becomes necessary to shop for car loans for poor credit applicants, there can be no surprises in store for the borrower. Since the price of a new car, and most used cars, is large enough that paying the entire price upfront is impractical, most car shoppers will seek some sort of financing in order to make the purchase a reality. A new car buyer knowing that he, or she, needs financing is very different from knowing who to get financing from and getting car loans for poor credit becomes a bit of puzzle.
There are differing opinions on where to go for car loans for people with poor credit. Getting financing directly through the car dealership has often been maligned due to the fact that a dealership’s loan officer is a part of the sales staff interested in getting a piece of inventory off the lot. This can be true for some car sellers, but is not always the case. While dealer financing is intimately tied to the selling of cars, they do have access to a number of banks that offer different car loan packages, at different interest rates with a certain degree of flexibility in offering car loans for poor credit applicants. Convenience is usually the reason most customers with poor credit will go to the dealer for financing whether, or not, it’s in their own best interest. According to AWARE (Americans Well-informed on Automobile Retailing Economics), over 24 million auto financing transactions occurred at the dealerships in 2011. Whether this is a promising statistic, or not, it indicates that consumers will often take the most convenient path available to get car loans for poor credit.
Many financing experts say the best route to go for car loans for people with poor credit, is a nationally known bank. Financing from a bank that one does regular business with, such as having checking or savings accounts, has the advantage that there is an existing relationship that might extend to friendships with bank personnel. Through this relationship, the bank has direct knowledge of the customers debts, spending habits, and income through deposits made by that customer. There might not be as much room to haggle over interest rates, but it’s likely that the bank will work more towards the interests of its customer than selling him, or her, on a car loan that will be too expensive for that customer to pay off.
More people than ever are turning to the internet for car loans. For poor credit, searching the web provides dozens of car loan companies, many partnered with national banks, that advertise fast loan approval no matter what the circumstances of the applicant – “bad credit, no credit, no problem,” is the common refrain for most of these companies. And, while it may sound like hucksterism at it’s sharpest, the fact is the vast majority of these firms are in the business to make loans to people with less than perfect credit simply because they offer a large enough market to drive profits through legitimate financing. The speed of the internet allows them access to all of the financial information a customer wishes to volunteer. Online applications further speed up the process of approval and most customers are able to get an answer one way, or another, within 24 hours of submitting the application.
Additionally, it’s an ideal strategy to shop for a lender before going to the dealership. The certainty of having a loan along with knowing the precise amount of money the prospective car buyer has to spend, helps to make the car buying decision a rational one rather than an emotional one. Once on the dealer’s lot, a car shopper will be confronted with a 4-man sales operation that is very carefully calculated to move particular vehicles, the ones that are not in heavy demand, off of the lot. This strategy is effective in that it can push a customer into making a snap decision rather than a well-thought-out decision. With a car loan secured before entering the dealership, the customer has a clear limit placed on his, or her, car-buying budget and stands as solid protection against the pressure car sales people are trained to apply.
Though often labeled as a bad place to go for car loans for poor credit applicants, the dealership does have access to certain financing packages and greater flexibility as to who can qualify for their car loans. While the fantastic interest rates they advertise to ring people into their lots are reserved only for people with good credit, there is a strong chance for someone with poor credit to get a loan on a car, especially if that car is a pre-owned vehicle. The terms and condition of a dealership financed car loan may not be ideal, but they are not always the worst terms available and can actually be helpful in repairing poor credit if that borrower lives up to the obligations of the debt.
And that’s essential to building and maintaining good credit – living up to one’s obligations. The act of borrowing places an obligation upon the person doing the borrowing as a lender has no responsibility to make a loan. That’s just the nature of the creditor-debtor relationship. The creditor volunteers to lend money, but the debtor is responsible for repaying the money lent. While it’s true that someone with bad credit is not, by necessity, irresponsible, that individual will be viewed as having a greater risk of failing to meet the obligations of a car loan. A consumer, forced by circumstances to seek car loans for poor credit, must take extra care in seeing to it that all of his, or her, credit obligations are met. Responsibility is what lenders look for in a client, and being responsible in all of one’s financial dealings will result in a healthy credit rating.