What Are the Best Car Loans When You Have Bad Credit?

If you have bad credit and need a car loan, there are some challenges when compared to obtaining a standard car loan. However, pick your head up because there are a handful of great lenders that specifically tailor their programs to people with bad credit. We researched the landscape of lenders that can help you get a car loan even if you have a below-average credit score.

Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors including loan options, requirements to qualify, and interest rates offered. Of course, we offer in-depth reviews of all the top lenders who offer bad credit car loans further down in this piece.

Apply now with our top pick: OneMain Financial

In this guide we also help you understand the factors that go into selecting the right auto lender, and how to get the best rate you can.

Most Important Factors for Bad Credit Car Loans

If you’re in the market for a bad credit car loan, there are a plethora of factors to consider and compare. Here are the main loan details we looked at in our study, and the ones you should prioritize as you select the best car loan for your needs.

  • Check your credit score. And understand what is in your credit report.
  • FICO scores under 579 is considered ‘poor’. But you may need a bad credit loan with a score as high as 669.
  • Interest rates and fees matter. These can make a huge difference in how much you pay for an auto loan each month.
  • Compare loan terms. Consider your repayment timeline and compare lenders with this in mind.
  • Getting prequalified online can help. Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report.
  • Watch out for loan restrictions. Some lenders impose restrictions on what car you can purchase. Keep this in mind to avoid unpleasant surprises later.

The Best Bad Credit Car Loans of 2021

The best bad credit car loans make it easy for consumers to qualify for the financing they need. The following lenders made our list due to their superior loan offerings, excellent customer service, and reputation in this industry.

Car Loan Company Best For… Get Started
onemain financial bad credit car loan Best for Flexibility Apply Now
bad credit car loan upgrade Best Personal Loan Option Apply Now
autocreditexpress logo Best Loan for Bad Credit and No Credit Apply Now
myautoloan bad credit car loan logo Best Loan Comparison Site Apply Now
capitalone logo Best Big Bank Loan for Bad Credit Apply Now
lightstream logo Best for Fast Funding Apply Now

Why Some Lenders Didn’t Make the Cut

While the lenders we are profiling are the best of the best, there are plenty of bad credit car loans that didn’t quite make the cut. We didn’t include any lenders that only offer auto loan refinancing, for example, since we know many people need a car loan in order to purchase a new or used car or truck. We also stayed away from bad credit car loans that charge outrageous fees for consumers with the lowest credit scores.

Bad Credit Auto Loan Reviews

We listed the top companies we selected in our study above, but we also aim to provide readers with more insights and details on each. The reviews below highlight the highlights of each lender that made our list, plus our take on who they might be best for.

OneMain Financial: Best for Flexibility

OneMain Financial offers personal loans and auto loans with interest rates that range from 18.00% to 35.99%. You can repay your auto loan in 24, 36, 48, or 60 months, and you can use this lender to borrow up to $20,000 for a new or used car. You can apply for your auto loan online and from the comfort of your own home, and it’s possible to get approved within a matter of minutes.

While OneMain Financial doesn’t list a minimum credit score requirement, it’s believed they will approve consumers with scores as low as 600. You should also note that auto loans from OneMain Financial come with an origination fee of up to 5% of your loan amount.

Sign Up With OneMain Financial Today

Why This Lender Made Our List: OneMain Financial offers a lot of flexibility in terms of your loan terms, including the option to repay your auto loan over five years. OneMain Financial also has pretty decent reviews from users for a bad credit lender, and they have an A+ rating with the Better Business Bureau.

Potential Downsides to Be Aware Of: OneMain Financial charges some pretty high rates for its bad credit loans, and don’t forget that you may need to pay an origination fee that is up to 5% of your loan amount. Their loans are also capped at $20,000, which means this lender won’t work for everyone.

Who It’s Best For: This lender is best for consumers with really poor credit who need auto financing but can’t get approved for a better loan.

Upgrade: Best Personal Loan Option

Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment timeline. You can borrow up to $50,000 in an unsecured loan, which means you won’t actually use the car you purchase as collateral for the loan.

You can repay the money you borrow over 36 to 60 months, which makes it possible for you to tweak your loan offer to secure a monthly payment you can afford. Upgrade has a minimum credit score requirement of 620 to qualify, although they’ll consider additional factors such as your income and employment history.

Sign Up With Upgrade Today

Why This Lender Made Our List: Upgrade lets you “check your rate” online without a hard inquiry on your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that Upgrade has an A+ rating with the BBB.

Potential Downsides to Be Aware Of: Upgrade charges APRs as high as 35.89% for consumers with the worst credit, and an origination fee of up to 6% of your loan amount might also apply.

Who It’s Best For: Upgrade is best for consumers with decent credit who need to borrow a larger loan amount. This loan is also best for anyone who wants an auto loan that isn’t secured by their vehicle.

AutoCreditExpress.com: Best Loan for Bad Credit and No Credit

AutoCreditExpress.com is an online platform that lets consumers with bad credit and even no credit get the financing they need. Once you fill out some basic loan information, you’ll be connected with a lender who can offer you financing as well as a dealership in your area. From there, you’ll head to the local dealership and pull the pieces of your auto loan together, including the purchase price of the car you want.

Sign Up With Autocreditexpress.com Today

Why This Lender Made Our List: AutoCreditExpress.com has an A+ rating with the Better Business Bureau. This platform also makes it possible for consumers with no credit at all to finance a car, which is a welcome relief for people who are building credit for the first time.

Potential Downsides to Be Aware Of: This website is a loan platform but they don’t offer loans directly to consumers. This means you won’t have any idea on rates and terms until you fill out an application and get connected with a lender.

Who It’s Best For: This loan is best for consumers with no credit or minimal credit history who cannot get approved for a loan elsewhere.

MyAutoLoan.com: Best Loan Comparison Site

MyAutoLoan.com is a loan comparison site that makes it easy to compare up to four auto loan offers in a matter of minutes. You can use this website to apply for a new auto loan, but you can also utilize it to consider refinancing offers for an auto loan you already have. You can also use funds from this platform to purchase a car from a dealer or from a private seller.

Sign Up With MyAutoLoan.com Today

Why This Lender Made Our List: Comparing auto loans in terms of their terms, rates, and fees is the best way to save money and wind up with the best deal. Since MyAutoLoan.com is a loan comparison site, they make it easy to shop around and compare competing offers.

Potential Downsides to Be Aware Of: Loan comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure you know and understand all the details of loans you’re considering before you sign on the dotted line.

Who It’s Best For: MyAutoLoan.com is best for consumers who want to do all their auto loan shopping with a single website.

Capital One: Best Big Bank Loan for Bad Credit

Capital One offers online auto loan financing in conjunction with a program called Auto Navigator®. This program lets you get prequalified for an auto loan online, then work with a participating dealer to coordinate a loan for the car you want. Capital One also lets you search available vehicles at participating dealerships before you apply for financing, making it easy to figure out how much you might need to borrow ahead of time.

Sign Up With Capital One Today

Why This Lender Made Our List: Capital One offers the huge benefit of letting you get prequalified online without a hard inquiry to your credit report. Capital One is also a reputable bank with a long history, which should give borrowers some comfort. They have an A+ rating with the BBB and plenty of decent reviews from consumers.

Potential Downsides to Be Aware Of: You should be aware that Capital One auto loans only work at participating dealers, so you may be limited in terms of available cars to choose from.

Who It’s Best For: Capital One auto loans are best for consumers who find a car they want to buy at one of the participating lenders that works with this program.

LightStream: Best for Fast Funding

LightStream offers online loans for a variety of purposes, including auto financing. Their auto loans for consumers with excellent credit start at just 3.99% with autopay, and even their loans for consumers with lower credit scores only run as high as 16.79% with autopay.

You can apply for your LightStream loan online and get approved in a matter of minutes. This lender can also send your funds as soon as the same business day you apply.

A minimum credit score of 660 is required for loan approval, although other factors like your work history and income are considered.

Sign Up With LightStream Today

Why This Lender Made Our List: LightStream offers auto loans with exceptional terms, and that’s even true for consumers with less than perfect credit. You can also get your loan funded as soon as the same business day you apply, which is crucial if you need auto financing so you can get back on the road.

Potential Downsides to Be Aware Of: With a minimum credit score requirement of 660, these loans won’t work for consumers with the lowest credit scores.

Who It’s Best For: LightStream is best for people with decent credit who need to get auto loan financing as quickly as possible.

What You Need To Know When Applying For A Car Loan With Bad Credit

Interest rates and fees matter.

If you think your interest rate and loan fees won’t make a big difference in your monthly payment, think again. The reality is that rates and fees can make a huge difference in how much you pay for an auto loan each month. Consider this: A $10,000 loan with an APR of 35.89% will require you to pay $361 per month for five years. The same loan amount at 21.99% APR will only set you back $276 per month. At 9.99%, you would pay only $212 per month for five years. The bottom line: Make sure to compare auto loans for bad credit so you wind up with the lowest possible APR you can qualify for.

Take steps to improve your credit score before you apply.

It’s not always possible to wait to apply for a car loan, but you may be able to secure a lower interest rate and better loan terms if you can improve your credit score before you borrow money. The most important steps you can take to improve your score include paying all your bills early or on time, as well as paying down debt in order to decrease your credit utilization. You should also refrain from opening or closing too many credit card accounts in order to avoid new inquiries on your credit report and maintain the longest average length of your credit history possible.

Compare loan terms.

Some lenders let you borrow money for up to 84 months, while others let you repay your loan over 36 or 60 months at most. If you need to repay your loan over a longer timeline in order to secure an affordable monthly payment, make sure to compare lenders based on this factor. If you’re having trouble figuring out how much can you can afford, gauging affordability based on the monthly payments you can handle can also help in that effort.

Getting prequalified online can help.

Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report. This makes it considerably easier to compare rates and shop around without formally applying for an auto loan. Getting prequalified with more than one lender can also help you determine which one might offer the lowest rate without having to fill out a full loan application.

Watch out for loan restrictions.

As you compare the lenders on this list, keep in mind that not all lenders extend loans for any car you want. Some only let you finance cars with participating lenders in their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you hope to purchase a car from someone you know or a website like craigslist.org, you may want to consider reaching out to your personal bank or a credit union you have a relationship with.

Bad credit car loans don’t have to be forever.

Finally, you should know that a car loan for bad credit doesn’t have to last forever. You may need to borrow money for a car right now regardless of the interest rate and terms you can qualify for, but it may be possible to refinance your loan into a better loan product later on. This is especially true if you focus on improving your credit score right away, and if you use your auto loan as an opportunity to prove your creditworthiness.

How to Get the Best Rate

1. Check your credit score.

Your credit score is one of the most important defining factors that dictate loan costs. Before you apply for an auto loan, it can help you check your credit score to see where you stand. Your score may not be as bad as you realize, but it could also be worse than you ever imagined. Either way, it helps to know this important information before you start shopping for an auto loan.

2. Improve your credit over time.

If your credit score needs work, you’ll want to take steps to start improving it right away. The most important steps you can take to boost your credit score include paying all your bills early or on time and paying down debt to decrease your credit utilization. Also, make sure you’re not opening or closing too many credit accounts within a short amount of time.

3. Check your credit reports.

Use the website AnnualCreditReport.com to get a free copy of your credit reports from all three credit bureaus. Once you have this information, check over your credit reports for errors. If you find false information that might be hurting your score, take the steps to have the incorrect information removed.

4. Compare loan offers from at least three lenders.

A crucial step to get the best rate involves shopping around and comparing loan offers from at least three different lenders. This is important since lenders with different criteria might offer a lower APR or better terms than others.

5. Be flexible with repayment terms.

Also consider a few different loan terms provided you can afford the monthly payment with each. Some auto lenders offer better rates for shorter terms, which can help you save money if you can afford to repay your loan over 24 or 36 months instead of 60+.

How We Chose the Best Auto Loans

The lenders on our list weren’t plucked out of thin air. In fact, the team behind this guide spent hours comparing auto lenders based on a wide range of criteria. Here’s everything we considered when comparing the best bad credit car loans of 2021:

Interest Rates and Loan Terms: Our team looked for loans that offer reasonable rates and terms for consumers with poor credit. While higher APRs are typically charged to consumers with a low credit score, we only considered lenders that offer sensible rates that don’t seem out of line for the auto loan market.

Ratings and Reviews: We gave preference to lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We also gave higher marks to lenders who have a positive rating with the Better Business Bureau (BBB).

Online Availability: Lenders who offer full loan details online were definitely given top priority in our ranking, and lenders who let you get prequalified online without a hard inquiry on your credit report were given the most points in this category. But since not everyone wants to apply for a loan online, we also included some lenders that let you apply over the phone.

Approval Requirements: Finally, we looked for lenders that extend credit to consumers with low credit scores in the first place. Not all lenders offer specific information on approval requirements, but we did our best to sort out lenders that only accept borrowers with good or excellent credit.

Summary: Best Bad Credit Card Loans of 2021

  • Best for Flexibility: OneMain Financial
  • Best Personal Loan Option: Upgrade
  • Best Loan for Bad Credit and No credit: AutoCreditExpress.com
  • Best Loan Comparison Site: MyAutoLoan.com
  • Best Big Bank Loan for Bad Credit: CapitalOne
  • Best for Fast Funding: LightStream

The post What Are the Best Car Loans When You Have Bad Credit? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

What Is A Consumer Loan?

A consumer loan is a loan or line of credit that you receive from a lender.

Consumer loans can be auto loans, home mortgages, student loans, credit cards, equity loans, refinance loans, and personal loans.

This article will address each type of consumer loans.

Get Approved for personal loan today.

Types of consumer loans:

Consumer loans are divided into several kinds of categories. They include auto loans, student loans, home loans, personal loans and credit cards. Regardless of type, consumer loans have one thing in common: you have to repay the loan at some period of time. 

Auto loans

Most people who are thinking of buying a car will apply for an auto loan. That is because buying a car is expensive.

In fact, it is the second largest expense you will ever make besides buying a house. And unless you intend to buy it with all cash, you will need a car loan.

So, car loans allow consumers to purchase a vehicle where they may not have the money upfront. With an auto loan, your payment is broken into smaller repayments that you will make over time every month.

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You can choose between a fixed or variable interest rate loan. But the most important thing is, whether you’re buying a new or used car, it’s important to compare loans to help you find the right auto loan for your needs.

Start comparing auto loans now!

Home loans

Another, and most common, type of consumer loans are home loans. A home loan or mortgage is a loan a consumer receives for the purpose of buying a house.

Buying a house is, undoubtedly, the biggest expense you’ll ever make in your life. So, for the majority of consumers who want to purchase a house, they will need to borrow the money from a lender.

Home loans are paid back over a period of time. Those mortgages term are typically 15 to 30 years. They can be variable rate or fixed rate. A fixed rate means that your repayments are locked in for a fixed term.

Whereas a variable rate means that your repayments depend on the interest rate going up or down when the Federal Reserve changes the rate.

Over the loan’s term, you will pay back the principle amount of the loan plus interest. This makes it very important to compare home loans. Doing so allows you to save thousands of dollars on interest and fees.

Personal Loans

The most common types of consumer loans are personal loans. That is because a personal loan can be used for a lot of things.

A personal loan allows a consumer to borrow a sum of money. The borrower agrees to repay the loan (plus interest) in installments over a period of time.

A personal loan is usually for a lower amount than a home loan or even an auto loan. People usually ask for $500 to $20,000 or more.

A personal loan can be secured (the consumer backs it with his or her personal assets) or unsecured (the consumer does not have to use his or her personal asset).

But most of them are unsecured, so getting approved for one will depend on your credit score, income and other factors.

But consumers use personal loans for different purposes. People take out personal loans to consolidate debts, such as credit card debts. You can use personal loans for a wedding, a holiday, to renovate your home, to buy a flt screen TV, etc…

Student Loans

Consumers use these types of loans to finance their education. There are two types of student loans: federal and private. The federal government funds a federal student loan.

Whereas, a private entity funds a private student loan. Generally, federal student loans are better because they come at a lower interest rate.

Credit Cards

Believe it or not credit cards is a type of consumer loans and they are very common. Consumers use this type of loan to finance every day expenses with the promise of paying back the money with interest.

Unlike other loans, however, every time your pay with your credit card, you take a personal loan.

Credit cards usually carry a higher interest rate than the other loans. But you can avoid these interests if you pay your balance in full immediately.

Small Business Loans

Another type of consumer loans are small business loans. These loans are used specifically to create a business or to expand an already established business.

Banks and the Small Business Administration (SBA) usually provide these loans. Small Business Loans are different than personal loans, because you usually have to provide a collateral to get the loan.

The collateral serves as a way to protect the lender in case you default on the loan. In addition, you will also need to provide a business plan for the lenders to review.

Home Equity Loans

If you have your own home, you can borrow money against it. These types of consumer loans are called home equity loans. If you’ve paid off the mortgage on the home, you can borrow up to the full value of the home.

Vice versa, if you’ve paid half of the mortgage on the home, you can borrow half of the value of the house. You can use a home equity loan for several purposes like you would with a personal loan.

But most consumers use this type of loan to renovate their house.  One disadvantage of this type of loan, however, is that you can lose your house in case of a default, because your house is used as a collateral for the loan.

Refinance loan

Loan refinancing is a basically taking a new loan to replace an existing one. But you get this loan specifically either to refinance your existing mortgage or to refinance your student loans or a personal loan.

Consumers usually refinance in order to receive a lower interest rate or to reduce the amount of monthly payments they are making on their existing loans.

However, reducing to a lower payment will lengthen the time to pay off the loan and you will accrue interest as a result.

Consumers also use this type of loan to pay their existing loans off faster. However, some mortgage refinancing loans come with prepayment penalties. So do you research in order to avoid that extra charge.

The bottom line is consumer loans can help you with your goals. However, understanding different loan types is important so that you can choose the best one that fits your particular situation.

So do you need a consumer loan?

Get Approved for personal loan today.

Speak with the Right Financial Advisor

If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post What Is A Consumer Loan? appeared first on GrowthRapidly.

Source: growthrapidly.com

5 Steps for Getting a Car Loan

This Article was Updated July 5, 2018

When you are looking to buy a vehicle, the first thing you should do is apply for a preapproved loan. The loan process can seem daunting, but it’s easier than you think and getting preapproval prior to going to the car dealer may help alleviate a lot of frustration along the way.

Here are five steps for getting a car loan.

  1. Check Your Credit
  2. Know Your Budget
  3. Determine How Much You Can Afford
  4. Get Preapproved
  5. Go Shopping

1. Check Your Credit

Before you shop for a loan, check your credit report. The better your credit, the cheaper it is to borrow money and secure auto financing. With a higher credit score and a better credit history, you may be entitled to lower loan interest rates, and you may also qualify for lower auto insurance premiums.

Review your credit report to look for unusual activity. Dispute errors such as incorrect balances or late payments on your credit report. If you have a lower credit score and would like to give it a bit of a boost before car shopping, pay off credit card balances or smaller loans.

If your credit score is low, don’t fret. A lower score won’t prevent you from getting a loan. But depending on your score, you may end up paying a higher interest rate. If you have a low credit score and want to shoot for lower interest rates, take some time to improve your credit score before you apply for loans or attempt to secure any other auto financing.

2. Know Your Budget

Having a budget and knowing how much of a car payment you can afford is essential. You want to be sure your car payment fits in line with your other financial goals. Yes, you may be able to cover $400 a month, but that amount may take away from your monthly savings goal.

If you don’t already have a budget, start with your monthly income after taxes and subtract your usual monthly expenses and how much you plan to put in savings each month. For bills that don’t come every month, such as Amazon Prime or Xbox Live, take the yearly charge and divide it by 12. Then add the result to your monthly budget. If you’re worried, you spend too much each month, find simple ways to whittle your budget down.

You’ll also want to plan ahead for new car costs, such as vehicle registration and auto insurance, and regular car maintenance, such as oil changes and basic repairs. By knowing your budget and what to expect, you can easily see how much room you have for a car payment.

3. Determine How Much You Can Afford

Once you understand where you are financially, you can decide on a reasonable monthly car payment. For many, a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. In other words, if you make $60,000 after taxes a year, you shouldn’t spend more than $500 per month on car payments. But depending on your budget, you may be better off with a lower payment.

With a payment in mind, you can use an auto loan calculator to figure out the largest loan you can afford. Simply enter in the monthly payment you’d like, the interest rate, and the loan period. And remember that making a larger down payment can reduce your monthly payment. You can also use an auto loan calculator to break down a total loan amount into monthly payments.

You’ll also want to think about how long you’d like to pay off your loan. Car loan terms are normally three, four, five, or six years long. With a longer loan period, you’ll have lower monthly payments. But beware—a lengthy car loan term can have a negative effect on your finances. First, you’ll spend more on the total price of the vehicle by paying more interest. Second, you may be upside down on the loan for a larger chunk of time, meaning you owe more than the car is actually worth.

4. Get Preapproved

Before you ever set foot on a car lot, you’ll want to be preapproved for a car loan. Research potential loans and then compare the terms, lengths of time, and interest rates to find the best deal. A great place to shop for a car loan is at your local bank or credit union. But don’t stop there—look online too. The loan with the best terms, interest rate, and loan amount will be the one you want to get preapproved for. Just know that preapproved loans only last for a certain amount of time, so it’s best to get preapproved when you’re nearly ready to shop for a car.

However, when you apply, the lender will run a credit check—which will lower your credit score slightly—so you’ll want to keep all your loan applications within a 14-day period. That way, the many credit checks will only show as one inquiry instead of multiple ones.

When you’re preapproved, the lender decides if you’re eligible and how much you’re eligible for. They’ll also tell you what interest rate you qualify for, so you’ll know what you have to work with before you even walk into a dealership. But keep in mind that preapproved loans aren’t the same as final auto loans. Depending on the car you buy, your final loan could be less than what you were preapproved for.

In most cases, if you secure a pre-approved loan, you shouldn’t have any problems getting a final loan. But being preapproved doesn’t mean you’ll automatically receive a loan when the time comes. Factors such as the info you provided or whether or not the lender agrees on the value of the car can affect the final loan approval. It’s never a deal until it’s a done deal.

If you can’t get preapproved, don’t abandon all hope. You could also try making a larger down payment to reduce the amount you are borrowing, or you could ask someone to cosign on the loan. If you ask someone to cosign, take it seriously. By doing so, you are asking them to put their credit on the line for you and repay the loan if you can’t.

When co-signing a car loan, they do not acquire any rights to the vehicle. They are simply stating that they have agreed to become obligated to repay the total amount of the loan if you were to default or found that you were unable to pay.

Co-signing a car loan is more like an additional form of insurance (or reassurance) for the lender that the debt will be paid no matter what.

Usually, a person with bad credit or less-than-perfect credit may require the assistance of a co-signer for their auto financing and loan.

5. Go Shopping

Now you’re ready to look for a new ride. Put in a little time for research and find cars that are known to be reliable and fit into your budget. You’ll also want to consider size, color, gas mileage, and extra features. Use resources like Consumer Reports to read reviews and get an idea of which cars may be best for you.

Once you have narrowed down the car you are interested in, investigate how much it’s worth, so you aren’t accidentally duped. Sites such as Kelley Blue Book or Edmunds can help you figure out the going rate for your ideal car. After you’re armed with this information, compare prices at different car dealerships in your area. And don’t forget to check dealer incentives and rebates to get the best possible price.

By following these steps, you’ll be ready to make the best financial decision when getting a car loan. Even if you aren’t ready to buy a car right now, it doesn’t hurt to be prepared. Start by acquiring a free copy of your credit summary.

It is always a good idea to pull your credit reports each year, so you can make sure they are as accurate as they should be. If you find any mistakes, be sure to dispute them with the proper credit bureau. Remember, each credit report may differ, so it is best to acquire all three.
If you want to know what your credit is before purchasing a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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The post 5 Steps for Getting a Car Loan appeared first on Credit.com.

Source: credit.com

What Credit Score Do I Need to Buy a Car?

What Credit Score Do You Need to Get An Auto Loan?

Article Updated July 18, 2018.

If it’s time to purchase a new vehicle, you may be wondering about one obstacle that could get in your way: your credit. Maybe you’re unsure how good your credit is, and you don’t know what credit score is needed to buy a car either. It is better to educate yourself with the knowledge you need to move forward with the car buying process to help alleviate any frustration or challenges you may find along the way to car ownership.

No matter your credit score, you can probably find a way to finance a car loan if you absolutely must buy a new vehicle. The real question is what your credit score will cost you when you make the purchase. The better your credit score, the better your chances may be of receiving a cheaper and more affordable interest rate and payment per month.

So, while there’s no minimum credit score required for car loans, your credit history and credit score can definitely make a big difference in the car buying process.

Bad Credit Scores Mean Much Higher Interest Rates

According to data from Experian Automotive, the difference in interest rates on a new car loan for someone with excellent credit versus someone with very poor credit is over 11 percentage points.

In fact, 2.84% was the average interest rate someone with a super-prime (excellent) credit score paid in the first quarter of 2017, while those with deep subprime (very poor) credit paid an average interest rate of 13.98% or higher.

To illustrate this difference, consider that you apply for a 60-month loan on a car that costs $25,000. With a 2.84% interest rate, the total cost of your car would be $26,847 with payments of $447 per month. Not too shabby.

For the same loan but an interest rate of 13.98%, your car loan would cost you $34,887, and you’d pay $581 per month. That’s more than $8,000 extra! Clearly, poor credit can result in you paying a lot more for your new vehicle.

The difference was even starker in comparison to those financing used cars. Those with super-prime credit paid an average rate of 3.56%, while those with deep subprime credit paid an average of 19.62%—more than 16 percentage points higher.

Average New Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime (781–850): 2.84%
  • Prime (661–780): 3.77%
  • Nonprime (601–660): 6.60%
  • Subprime (501–600): 11.05%
  • Deep subprime (300–500): 13.98%

Note that the credit labels above represent Experian’s credit ranges. Other credit reporting agencies use different scales and labels so the information may differ between each credit bureau.

Experian uses a scoring model of 300 to 850. You will find the prime borrowers on the top of this spectrum, and the deep subprime borrowers are at the lower end of the spectrum.

Even if your credit score doesn’t fall into the average ranks as outlined below, you may still be able to qualify for a vehicle loan with a score of between 600 and 660.

Average Used Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime: 3.56%
  • Prime: 5.29%
  • Nonprime: 9.88%
  • Subprime: 16.48%
  • Deep subprime: 19.62%

The dealer may also evaluate your credit using another type of credit score called VantageScore. VantageScore, which was developed by all three of the major reporting agencies, assigns different weights to different parts of your credit history, such as on-time payments, balances, and utilization.

Some people may benefit from a lender using their VantageScore, while others may be at a disadvantage.

Subprime Auto Loans

If you find that you are ineligible for a traditional car loan because you have a low credit score or less than perfect credit, or your income is below where it needs to be, then you will need to look into a subprime auto loan.

Subprime auto loans tend to be a lot riskier than regular or traditional car loans, and they typically come attached to much higher interest rates and fees, and you are paying for much longer terms.

Subprime lending is also often referred to as near-prime, subpar, non-prime, and second-chance lending. However, instead of using this type of high interest loan, if available, you should instead improve your credit, so it is no longer less-than-perfect-credit. You could also see if you could instead qualify for in-house financing at the dealership, so you do not have to be a subprime borrower and risk putting yourself under even more financial strain.

Where to Start If You’re Unsure

If you’re nervous about letting a car dealer check your credit—but even if you aren’t—it’s helpful to check your score yourself in advance. You can check your credit report for free to make sure you don’t have any surprises and to find mistakes.

Note that the credit scores an auto lender uses may be slightly different because it will be tailored for an auto loan. Still, it’s a good start—if your general credit score is strong, you can also bet that the score the dealer uses is strong.

We also recommend that you try to get pre-approved for a car loan from a bank or credit union before setting foot in the dealership. With a set interest rate in hand, if the dealer can offer you a better rate, perfect! If not, you’ll be prepared to pay what your bank approved you for.

How to Get Pre-approved for a Car Loan

You can apply for pre-approval for a car loan easily online, in person, or even over the phone. The lender will perform a hard credit check to see the state of your credit, and they will then gather all of your financial information such as your monthly income, and they will then have a better idea about whether or not they will provide you with the car loan.

All of these factors will figure into the interest rate, monthly payment, loan amount, and even the length of the loan. There is also something called pre-qualification, but this process will not be as accurate as the pre-approval process because they are not able to take such a close look at your credit.

If and when you are pre-approved, the lender will provide you with an offer statement in the form of a letter, certificate, or another form of proof so you can take it to the car dealership of your choice and begin the car buying process.

Remember, even if you are pre-approved, you will want to set a very realistic budget for yourself prior to looking at cars so you will have a better idea of what you can afford and what you should be looking into.

Getting the Best Auto Loan

Getting the best auto loan is important when it comes to affordability and value. It is recommended that you look at options from different banks and credit unions and other online lenders to make sure you are getting the lowest possible interest rate you can get. Finding a car dealership that offers financing may also prove to be a beneficial idea as well; especially if your credit is less than ideal.

When planning to finance a new or used car, it is always best to take your time and plan it out because it is a big purchase and investment. If you are able and have the time, you should consider working on your credit score to improve your credit, so you are able to lock in a much better deal.

Pull your credit report and look through it thoroughly. Always be on the lookout for any errors so you can dispute them and get them removed. It is also important to make sure you are paying all of your bills on time, your credit balances are low, and you are not opening any new lines of credit except when you actually need to.

You will be presented with better financing options if you can show the potential lenders that you are responsible and can pay your bills on time and maintain good credit.

A Word of Caution

Credit inquiries related to auto loans made within a short time frame (usually 14 days, or 45 days depending on the credit score model being used) are supposed to count as a single inquiry. However, some of our readers have found their credit scores dropping after multiple car dealers sent credit inquiries for financing. This is another reason why getting pre-approved before going to the dealership is a good idea.

 

If want to make sure your credit is good enough to purchase a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Here’s What Else You Should Know about Auto Loans:

The post What Credit Score Do I Need to Buy a Car? appeared first on Credit.com.

Source: credit.com

Should You Refinance Your Student Loans?

Due to financial consequences of COVID-19 — and the broader impact on our economy — now is an excellent time to consider refinancing most loans you have. This can include mortgage debt you have that may be converted to a new loan with a lower interest rate, as well as auto loans, personal loans, and more.

Refinancing student loans can also make sense if you’re willing to transition student loans you currently have into a new loan with a private lender. Make sure to take time to compare rates to see how you could save money on interest, potentially pay down student loans faster, or even both if you took the steps to refinance.

Get Started and Compare Rates Now

Still, it’s important to keep a close eye on policies and changes from the federal government that have already taken place, as well as changes that might come to fruition in the next weeks or months. Currently, all federal student loans are locked in at a 0% APR and payments are suspended during that time. This change started on March 13, 2020 and lasts for 60 days, so borrowers with federal loans can skip payments and avoid interest charges until the middle of May 2020.

It’s hard to say what will happen after that, but it’s smart to start figuring out your next steps and determining if student loan refinancing makes sense for your situation. Note that, in addition to lower interest rates than you can get with federal student loans, many private student lenders offer signup bonuses as well. With the help of a lower rate and an initial bonus, you could end up far “ahead” by refinancing in a financial sense.

Still, there are definitely some negatives to consider when it comes to refinancing your student loans, and we’ll go over those disadvantages below.

Should You Refinance Now?

Do you have student loan debt at a higher APR than you want to pay?

  • If no: You shouldn’t refinance.
  • If yes: Go to next question.

Do you have good credit or a cosigner? 

  • If no: You shouldn’t refinance.
  • If yes:  Go to next question.

Do you have federal student loans?

  • If no: You can consider refinancing
  • If yes: Go to next question

Are you willing to give up federal protections like deferment, forbearance, and income-driven repayment plans?

  • If no: You shouldn’t refinance
  • If yes: Consider refinancing your loans.

Reasons to Refinance

There are many reasons student borrowers ultimately refinance their student loans, although they can vary from person to person. Here are the main situations where it can make sense to refinance along with the benefits you can expect to receive:

  • Secure a lower monthly payment on your student loans.
    You may want to consider refinancing your student loans if your ultimate goal is reducing your monthly payment so it fits in better with your budget and your goals. A lower interest rate could help you lower your payment each month, but so could extending your repayment timeline.
  • Save money on interest over the long haul.
    If you plan to refinance your loans into a similar repayment timeline with a lower APR, you will definitely save money on interest over the life of your loan.
  • Change up your repayment timeline.
    Most private lenders let you refinance your student loans into a new loan product that lasts 5 to 20 years. If you want to expedite your loan repayment or extend your repayment timeline, private lenders offer that option.
  • Pay down debt faster.
    Also, keep in mind that reducing your interest rate or repayment timeline can help you get out of student loan debt considerably faster. If you’re someone who wants to get out of debt as soon as you can, this is one of the best reasons to refinance with a private lender.

Why You Might Not Want to Refinance Right Now

While the reasons to refinance above are good ones, there are plenty of reasons you may want to pause on your refinancing plans. Here are the most common:

  • You want to wait and see if the federal government will offer 0% APR or forbearance beyond May 2020 due to COVID-19.
    The federal government has only extended forbearance through the middle of May right now, but they might lengthen the timeline of this benefit if you wait it out. Since this perk only applies to federal student loans, you would likely want to keep those loans at 0% APR for as long as the federal government allows.
  • You may want to take advantage of income-driven repayment plans.
    Income-driven repayment plans like Pay As You Earn (PAYE) and Income-Based Repayment let you pay a percentage of your discretionary income each month then have your loans forgiven after 20 to 25 years. These plans only apply to federal student loans, so you shouldn’t refinance with a private lender if you are hoping to sign up.
  • You’re worried you won’t be able to keep up with your student loan payments due to your job or economic conditions.
    Federal student loans come with deferment and forbearance that can buy you time if you’re struggling to make the payments on your student loans. With that in mind, you may not want to give up these protections if you’re unsure about your future and how your finances might be.
  • Your credit score is low and you don’t have a cosigner.
    Finally, you should probably stick with federal student loans if your credit score is poor and you don’t have a cosigner. Federal student loans come with fairly low rates and most don’t require a credit check, so they’re a great deal if your credit is imperfect.

Important Things to Note

Before you move forward with student loan refinancing, there are some details you should know and understand. Here are our top tips and some important factors to keep in mind.

Compare Rates and Loan Terms

Because student loan refinancing is such a competitive industry, shopping around for loans based on their rates and terms can help you find out which lenders are offering the most lucrative refinancing options for someone with your credit profile and income.

We suggest using Credible to shop for student loan refinancing since this loan platform lets you compare offers from multiple lenders in one place. You can even get prequalified for student loan refinancing and “check your rate” without a hard inquiry on your credit score.

Check for Signup Bonuses

Some student loan refinancing companies let you score a bonus of $100 to $750 just for clicking through a specific link to start the process. This money is free money if you’re able to take advantage, and you can still qualify for low rates and fair loan terms that can help you get ahead.

We definitely suggest checking with lenders that offer bonuses provided you can also score the most competitive rates and terms.

Consider Your Personal Eligibility

Also keep your personal eligibility in mind, including factors beyond your credit score. Most applicants who are turned down for student loan refinancing are turned away based on their debt-to-income ratio and not their credit score. Generally speaking, this means they owe too much money on all their debts when you compare their liabilities to their income.

Credible also notes that adding a creditworthy cosigner can improve your chances of prequalifying for a loan. They also state that “many lenders offer cosigner release once borrowers have made a minimum number of on-time payments and can demonstrate they are ready to assume full responsibility for repayment of the loan on their own.”

It’s Not “All or Nothing”

Also, remember that you don’t have to refinance all of your student loans. You can just refinance the loans at the highest interest rates, or any particular loans you believe could benefit from a different repayment term.

4 Steps to Refinance Your Student Loans

Once you’re ready to pull the trigger, there are four simple steps involved in refinancing your student loans.

Step 1: Gather all your loan information.

Before you start the refinancing process, it helps to have all your loan information, including your student loan pay stubs, in one place. This can help you determine the total amount you want to refinance as well as the interest rates and payments you currently have on your loans.

Step 2: Compare lenders and the rates they offer.

From there, take the time to compare lenders in terms of the rates they can offer. You can use this tool to get the process started.

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Step 3: Choose the best loan offer you can qualify for.

Once you’ve filled out basic information, you can choose among multiple loan offers. Make sure to check for signup bonus offers as well as interest rates, loan repayment terms, and interest rates you can qualify for.

Step 4: Complete your loan application.

Once you decide on a lender that offers the best rates and terms, you can move forward with your full student loan refinancing application. Your student loan company will ask for more personal information and details on your existing student loans, which they will combine into your new loan with a new repayment term and monthly payment.

The Bottom Line

Whether it makes sense to refinance your student loans is a huge question that only you can answer after careful thought and consideration. Make sure you weigh all the pros and cons, including what you may be giving up if you’re refinancing federal loans with a private lender.

Refinancing your student loans can make sense if you have a plan to pay them off, but this strategy works best if you create a debt repayment plan you can stick with for the long-term.

The post Should You Refinance Your Student Loans? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

What Is “Accessible Income” on a Credit Card Application?

If you’re applying for a credit card, you might stumble upon this term “accessible income.” In fact, that’s the only situation in which you will come across the term: on a credit card application. So, you need to know what it is.

Accessible income is not just income you earn from your regular job. Rather, it includes much more than that. It includes income from a wide variety of sources, like retirement savings accounts, social security payments, trust funds, just to name a few.

Accessible income can work in your favor because not only you can list income from your job, but also all types of other money you receive in a given year. This in turn will increase your chance of getting approved for the credit card, simply because you can list a higher income.

It also can get you approved for a higher credit limit, which in turn can help your credit score and allow you more spending freedom. In this article, I will explain what accessible income is and the types of income you need to include in your credit card application. Before you start applying for too many credit cards, consult with a financial advisor who can help you develop a plan.

What is accessible income?

Accessible income means all of the money that you have accessed to if you are 21 years old or older. According to the Credit Card Accountability Responsibility and Disclosure Act, lenders are required to offer you credit if you are able to pay your bill. If you do not make enough money and do not receive enough income from other sources and cannot make payments, they can reject your application. That is why they ask for your accessible income.

If you are between the age of 18 and 20, your accessible income is limited to income for your job, scholarships, grants and money from your parents or other people.

However, if you are 21 and older, your accessible income involves way more than that. It includes income from the following sources:

  • Income paychecks
  • Tips
  • Bank checking accounts
  • Savings accounts
  • Income of a spouse
  • Grants, scholarships, and other forms of financial aid
  • Investments income
  • Retirement funds
  • Trust funds
  • Passive income
  • Checks from child support and spousal maintenance
  • Allowances from your parents or grandparents
  • Social security payments or SSI Disability payments

To report that accessible income, just add them all up to arrive at a total and submit it. The credit card companies will not ask you to provide the specific source of each income

What does not count as accessible income

Loans including personal loans, mortgage, auto loans do not count as accessible income simply because they are borrowed money. So, do not list them when submitting your credit card application.

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Accessible income on the credit card application

Accessible income is only associated with credit card applications. In other words, you’re only asked that when you’re applying for credit cards. When applying for a credit card, you should take advantage of all sources of income and not just the income from your job.

So, you should make sure to gather all of the money you have accessed to that year. Not doing so means that you’re leaving other income that is just as important. As mentioned above, you should not include loans or any borrowed money.

When reporting your accessible income, be as accurate and truthful as possible. While some credit card companies may take your word for it, others may ask you to verify your income. In that case, you will need to provide hard proof like pay stubs, bank statements, statement from your investments accounts, etc…

Why providing accessible income important?

Your credit score is the most important factor credit card companies rely on to decide whether to offer you a credit card. However, your income is also important. The higher your income, the better.

A high income means that you’re able to cover debt that you may accumulate on your credit card. And the higher your chance is that they will approve you. The opposite is true. If you have a low income, some credit card companies may not approve you even if you have a good credit score. So, in order to increase your chance, you should take advantage of accessible income.

The bottom line

The only situation where you will find “accessible income” is on a credit card application. Accessible income is all income you have access to in any given year. That includes much more than your paychecks from your regular jobs.

But it also includes all types of money including checks from child support or alimony, allowances from your parents or grandparents, money in your retirement and investment accounts, etc. So, you should take advantage of it when applying for a credit card.

Speak with the Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post What Is “Accessible Income” on a Credit Card Application? appeared first on GrowthRapidly.

Source: growthrapidly.com

Leasing a Car: 7 Reasons Why You Should Consider It

7 Reasons Leasing a Car May Be Smarter for You

Would you like to spend less money up-front, drive away from the dealership in a brand-new car, and spend less time and money on vehicle maintenance?

Consider leasing your next car.

What Does Leasing a Car Mean?

Leasing a car is a lot like renting one—but for a much longer period of time. When you buy a car, you own it after you’ve made all your monthly payments. When you lease a car, you make monthly payments, drive it for a set amount of time (usually about three years), and then give it back to the dealer when that time is up.

Then you get to decide what you want to do next with no strings attached—do you want to lease again or buy a car this time?

While leasing isn’t the perfect solution for everyone, it is absolutely worth considering. Here are seven reasons leasing a car might be the better option for you.

1. You Get to Drive Newer Cars

If you’re the kind of person who likes driving a new car, leasing your vehicle may be a better option than buying one. Cars depreciate quickly, so if you buy a new car, you’ll probably owe more than it’s worth not long after you make the initial purchase.

If you lease instead of buy, you can keep driving new cars indefinitely—just trade in your old lease for a new one every few years. That means you’ll have access to the latest features, like better navigation, back-up cameras, or music players. You could even lease an expensive car for an affordable monthly payment.

2. You Probably Pay Less Up-Front

Traditional car loans usually come with somewhat hefty down payments. But if you lease instead, you’ll likely have a lower down payment than you would with a normal loan. In fact, some dealers may not require a down payment at all.

This means you pay much less up-front so you can put that extra money toward home repairs, a vacation, or paying down existing debt.

3. You Get to Drive a Safer, More Reliable Car

When you lease, you’ll probably drive a newer car, which can be safer and more reliable. The newest cars have the most recent safety features and are compliant with current safety regulations that older cars might not meet.

Plus, since a newer car has less wear and tear, it’s less likely to break down and leave you stranded in an unsafe situation on the side of a fast highway or miles away from civilization.

4. You’ll Likely Spend Less on Repairs and Maintenance

Usually, a newer car needs fewer repairs, but when issues do come up, repairs will often cost less if you lease your vehicle. Most of the time, the vehicle you’re leasing will still be covered by the manufacturer’s warranty, so you won’t have to foot the bill for expensive repairs. There’s a good chance that basic maintenance, like oil changes, will also be covered in your lease agreement or car warranty. 

5. Your Monthly Payments Might Be Lower

When you lease a vehicle, you pay for the vehicle’s depreciation during the lease. When you buy, you’re paying taxes, fees, special finance charges, and the full price of the vehicle.

This means that monthly lease payments are usually lower than loan payments.

6. You Don’t Have to Worry about Selling Your Car

Selling a used car can be a hassle. With leasing, you skip it entirely. Instead, you drop the car off with the dealer when the lease is up. Then you’re free to lease a car again or purchase a new one without worrying about trade-in value or an ownership transfer.

7. You May Pay Less Sales Tax

If you buy a car, you pay taxes all at once for the full value of the vehicle. When you lease, you pay taxes on your monthly payment and spread that cost out over time, so there’s a good chance you’ll pay less sales tax.

Things to Remember about Leasing a Car

There are lots of great perks about leasing instead of buying, but it isn’t the perfect solution for every person. If you decide to lease a car, there are a few things you should remember.

  1. You Still Need to Get through a Credit Check

Leasing isn’t the same as a normal car loan, but it is still a form of financing, so a dealer will check your credit to make sure you’re eligible for a lease. In fact, you might need a higher credit score to lease than you would need to buy.

If you have a low credit score, you may pay a higher interest rate or be denied financing altogether. It is always wise to keep an eye on your credit report throughout the year to look for errors or other problems. For the best rates, make sure your credit is in good shape before you apply for financing.

  1. You May Have to Stick to a Mileage Limit

Leases come with mileage limitations. In most cases, that limitation will be somewhere between 10,000 and 12,000 miles per year. If you go over that limit, you pay extra fees for every extra mile—which can be costly.

Before you sign up for a lease, think carefully about how much you drive each year. Your daily commute is probably the biggest thing to consider, but all those little trips to the grocery store can also add up. If you drive more than 10,000 miles in a year, you may want to pay for extra miles or buy a car instead.

  1. You Get Charged for Extra Wear and Tear

Leases require you to keep the vehicle in good condition. If you turn it in with stains, scratches, dents, or dings, you’ll have to pay extra charges. Should you lease a car, take extra good care of it.

  1. You Could Be Penalized for Terminating the Lease Early

Car leases work a lot like other lease agreements. If you terminate your lease early, you may be subject to significant penalties and fees—just like you would be if you broke an apartment lease early.

  1. You Can’t Modify the Vehicle

Lease agreements have strict rules, and if you violate the agreement, you’ll be fined. Modifications will likely violate the warranty or lease terms—even if they’re modifications that you consider upgrades, such as shiny new rims or a more powerful sound system.

Should You Lease or Buy a Car?

Leasing is an excellent option if you’re comfortable with the limitations that are spelled out in the lease agreement. If you’re still on the fence, ask yourself the following questions to determine whether a lease is best for you:

  • How much do you drive each year? If you love going on epic road trips, leasing may not be the best option, but if you just need a car to get to and from work and around town, a lease would work well.
  • How much do you want to spend up-front? If you don’t have a large down payment saved up, you could get into a new car faster by leasing instead of buying.
  • Is driving a new car important to you? If you’re okay driving the same car for the next 10 to 15 years, you should probably just buy one. However, if you want to consistently drive newer vehicles, leasing is one of the easiest ways to do that.
  • Does vehicle maintenance frustrate you? Because leased cars are newer, they usually have fewer maintenance issues. And when those issues do come up, they’re often covered under the manufacturer’s warranty. If you don’t want to think too often about maintenance, leasing might be a good call.
  • Do you have good credit? Sometimes, you need better credit to lease a car than to buy one. If you’re still working on repairing your credit, you may have to purchase a car instead of leasing one.
  • Do you care more about short-term or long-term savings? Leasing is a great way to save on up-front costs. It also usually results in smaller monthly payments, which makes leasing a perfect option if you want to save money right now. However, in the long run, leasing may cost more than buying since you don’t own any property at the end of your lease.

When deciding whether leasing or buying a car is better for you, carefully consider all the various factors. It’s important to take your own needs and preferences into account to determine which is the most reasonable solution. Use the tips above and research local leasing options to ensure you pick the best one.
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The post Leasing a Car: 7 Reasons Why You Should Consider It appeared first on Credit.com.

Source: credit.com