Second Chance Auto Loans
If you’ve ever had a bankruptcy, foreclosure, short sale, car repossession, or just generally poor credit it can be difficult to get a car loan. All the financial advice books and websites tell you to go to your local bank and apply for a car loan before you purchase a car. That way when you already have your loan you can negotiate for the lowest car. However, when the bank laughs at you for your bad credit (yes, I literally had this happen to me) you feel like there is no hope for you to get a car loan. This is not true. In fact it’s only banks and their worshipping for the FICO score that doesn’t want to loan to you. There is a whole industry called the second chance auto loans industry that wants to take you on.
What is a Second Chance Auto Loan?
The second chance auto loan is simply a company that evaluates people and their financial situations and takes reasonable risks to an under-served group of customers. In short they charge you a little more interest and sometimes ask the auto dealer to take a portion of the risk in order to take on the loan and make the car sale. Some of the second chance credit auto loans companies have mission statements that involve helping people who are on hard times. These employees and owners tend to have a humanitarian streak who really believes good people fall on hard times and a small hand up can make the difference. If you are given a chance to prove your credit you must be prepared to make good on your promise. Yes a loan is a promise.
Prepare for Second Chance Auto Loans
The best thing you can do to prepare for a bad credit auto loan is to accept some financial responsibility. Don’t go and try and buy a car that is twice your annual salary. This isn’t going to show anyone you’re prepared for another try. You need to pick a modest car that is reasonable for your income range. No more than 10% of your take home salary in monthly payment. This will let the lenders know you are ready to make more financially responsible decisions. Another small thing you can do to help get your loan is to settle with debts that have gone into default. Odds are debts that seemed huge 5 years ago aren’t nearly as large today because your income has grown. Give these lenders a call (you can find their contact information on your credit report) and offer them about half of what you owe them in cash. Make sure you get it in writing before you send them any money that it is “paid in full.” When you do this your credit score will jump up significantly and it will show lenders that even if things turn bad for you in the near term eventually you will go back and make things right. This reduces their risk a lot. Hopefully, these tips will help improve your chances of getting second chance auto loans.
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