5 Tips for Getting Auto Financing with No Credit and a Low Income

You can get auto financing even if you do not have a long credit history or a high income. However, the amount of financing and the terms you receive are determined by your credit history. If your goal is to own a vehicle, then focus on this goal instead of the type of car you receive or your interest rate.

#1 Shop for a Loan First

Many people make the mistake of shopping for a car first, and then seeking a loan based on the type of car they would like. This can result in a person taking on too large of an auto loan and financial difficulties. You should always shop for a loan first if you have low income. Determine how much financing you will qualify for and how much you can afford in monthly payments. Once you know your price range, then you can purchase a car.

#2 Fulfill all Application Requirements

Your application is more important when your credit score and income are low than for someone with a more attractive financial profile. Since lenders will already be skeptical, you need to show them you are professional and can handle the burden of an auto loan. Fill out your application completely, and provide supplemental information where required.

#3 Provide Additional Collateral

If you are having difficulty securing a loan based on your financial situation alone, you may consider offering collateral in order to source the funds. Of course, your automobile will typically be one form of collateral used in your car loan. However, it is also possible to issue additional collateral in order to increase your loan limits, lower your interest rate or simply achieve a loan. You can use savings, stock and personal assets in order to gain financing.

#4 Look for Special Offers

Your car dealership may have offers that allow for low interest financing for certain groups of people. Those groups usually include students, recent graduates, teachers, military service people and other low income groups. If you have "no credit," you are usually a better candidate than someone with bad credit. This basically means you have not defaulted on a loan but simply have not taken many loans out in the past. Instead of actually being a high risk borrower, you are more along the lines of a middle risk borrower. Dealers will offer incentives to get you in your first car at a reasonable interest rate.

#5 Avoid a Cosigner

Your lenders may ask you to use a cosigner if you have no credit. You should avoid doing this, because it will rob you of the ability to build credit through the loan. While you may gain a small amount of individual credit through a cosigned loan, you will not gain nearly as much as you will if you assume the loan by yourself. It is one thing to go through the "no credit" loan process the first time around. Save yourself from having to do this again in the future by getting your first large installment loan on your own. Your future lenders will then base your loan on how you perform on this one.

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First Car Loan? How to Avoid Being Scammed

Getting your first car loan can be an exciting time in your life. The thrill of owning your first car is often an exhilarating experience. Knowing that something is all yours has a certain appeal. It is this excitement that often leads us into poor decisions when it comes to auto loans. In fact, you might be getting scammed and not even realize it. Here are a few ways to avoid being scammed on your first auto loan.

Extra Requirements

If you have no credit or questionable credit, shady car dealers love to pull this trick. They will go back and check your credit file. Then they will emerge and say that the bank is requiring that you get the extended warranty or some other type of add on. They make it sound like it makes them feel better about giving you the loan. In reality, they are just lying so that they can bump up the total sale a little bit and make more commission. Do not believe anyone that tells you this and tell them that you want what you agreed upon. Be prepared by equipping yourself with a copy of your credit report and do not let anyone persuade you that it is any different than what you have in front of you.

Not Paying Off Trade-In

While this is highly unethical, some shady car dealers still try it. When you go into the dealership to look at a car, they immediately want to know what you have to trade-in. Once you work out a deal for the car, they take the trade in and the responsibility to pay off the loan for you. However, sometimes they fail to pay off the loan for you. Then you have a car loan that no one is paying for and you no longer have your car. Then after a month or two, you get a phone call from your original lender and they want to know where their money is. This can really hurt your credit and get you in a legal battle with your new car dealership. Watch out for this common auto scam and protect yourself with legal documents securing the responsibility to the lender.

Co-signer Scam

Another common trick is getting a co-signer involved once you are rejected. If your credit is so bad that you are rejected for an auto loan, they suggest that you find someone to co-sign the loan for you. You call up your parents or someone else to co-sign with you and they come down to the dealership. However, when you get them down to the dealership, the dealer makes them the buyer of the car.

They might have you both sign some paperwork, but you later find out that your name is nowhere on the loan or the title. Your co-signer unwittingly agreed to purchase a car and they also took on all of the risk. You now have to make your payments every month in order to protect their credit. All of the risk was shifted from you to your friend without anyone knowing about it.

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5 Tips for Financing a New Car with Bad Credit

You can finance a new car with bad credit as long as you have no major installment debt defaults in your recent history. If you very recently experienced bankruptcy or a home foreclosure, you may need to lease a car for a few years as your credit recovers. If your credit is low due to previous missed payments, a short credit history or other flaws, a car loan may be just what you need to start getting your finances back on track. 

#1 Budget First, Apply Second

The first step to making this loan work for you is to set a goal early. Borrowers with bad credit need to be extremely watchful of a loan budget so they can make payments and repair their credit instead of going further into debt. Know your monthly payment goals instead of the overall price you are looking for. Monthly payments will have a bigger impact on your ability to pay than the price of the car will.

#2 Liquidate for a Down Payment

A large down payment can go a long way to making your loan application attractive. If you have savings, consider liquidating some to increase the size of a down payment. Otherwise, save for a few months prior to seeking the loan. Even a difference of $1,000 on a car loan can significantly change the cost of the loan and your ability to find new car financing.

#3 Prepare Income Verification

Even if your credit is poor, you will typically qualify for a car loan if your income is high enough. You will have to pay higher interest rates, but the income alone will be enough to get you a high enough limit to finance your car. As such, you should go into the application process with your income verification already prepared. By doing this, you will give the lender no reason to question you. Use a tax schedule or statement from your employer to provide verification.

#4 Seek Dealer Loans First

Dealers have an added incentive to source your loan: they will profit if you buy the car. As such, dealer loans are good options for high risk borrowers because they have traditionally lower interest rates to begin with. You may have to accept worse terms in the loan in order to get the funding you need at a decent rate. However, if you are willing to take high monthly payments and high fees, you will have a better chance with a dealer than you will with a bank.

#5 Look for Alternative Options

When other options fail, there are alternative lenders willing to fund high risk borrowers who have an income. You can locate these lenders through used car dealers, who have the most experience with them. Ask a used car dealer to give you a quote on any car you are considering trading in, and then ask about an independent financier the dealer would recommend. This will give you an insider's opinion on two things that will greatly impact the quality of your loan. 

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3 Reasons to Avoid Dealership Financing

Dealership financing is generally an option when you purchase a new vehicle. The financing may be provided through an auto manufacturer's financing arm, such as the Nissan Motor Acceptance Corporation or General Motors Acceptance Corporation, or through a private dealer's financial company. In either case, you will be purchasing your vehicle from the same person lending you the money for the purchase. This streamlined option is often the fastest way to get a loan and comes with low interest rates. However, there are many problems that arise with dealership financing as well.

#1 Bad Loan Terms

Dealership financing often has a shorter application process and looser loan standards than bank or traditional financiers. As a result, the dealer extends riskier loans to a wider variety of people. Not all of these borrowers repay the loans; dealerships tend to have a higher rate of default on their loans than banks do. To spread out the risk and compensate for these losses, dealers assign less favorable loan terms to borrowers. For example, there are very high prepayment fees for paying off a loan early. You may also find it more difficult to refinance or modify the loan in any way. Even adding a second person to your application or adding a second lien holder in the future can be precluded in your loan contract. Read over the terms very carefully to prevent unforeseen penalties in the future.

#2 Tied to Collateral

Most car loans use collateral as a means of securing the loan. Even if you finance through a bank, the bank will typically ask that you place the vehicle as collateral in case of default. While most lenders ask for this security, your car dealership holds a greater control over your collateral than another lender would. The dealer holds on to the car title until you pay off the loan. Dealers are notorious for simply showing up and seizing an asset without notifying you by mail or phone first. This is part of the loan terms you sign with a dealer, another reason to check the contract closely. You will generally find you have less ownership rights for your vehicle with a dealer loan than with a bank loan.

#3 Lack of Flexibility

For the reasons mentioned above, a dealer loan is generally less flexible than a bank loan. There are other reasons making these loans less flexible as well. For example, it is possible to take a personal loan from a bank to cover the cost of purchasing your vehicle. In addition to covering the purchase cost, you may seek an additional amount of funds in the same loan contract to provide for any expenses you may wish to cover through the single loan. Some individuals will use a personal loan to make both the down payment on the car and to finance the purchase of the vehicle. Others will use the extra funds to elect upgrades on the car. With a dealer, your loan is extended only in the amount that is listed on the sticker price for the vehicle.

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3 Tips for Getting a Great Deal on a Car

If you are looking for a good deal on a car you are definitely not alone. Shopping for a car is usually one of the biggest purchases that most people ever make. When you are potentially going to be spending several thousand dollars on something, you want to make sure that you get the best value that you can. Your car is something that you will use on a daily basis. You want it to work flawlessly during the time that you own it and you want it to perform. Therefore, you do not want to be taken advantage of during the sale and buy a car that is not of good quality. Here are a few tips that you can use for getting a great deal on a car that will not leave you stranded on the side of the road.

1. Negotiate

One thing that you need to keep in mind when you are searching for a car is that the price is always negotiable. The prices that the car dealers list on their cars should be merely a starting point for the negotiation. When you find a car that you would like to buy, you should never pay full price.

Some salespeople will try and tell you that a car price is not negotiable. If they tell you that after you have worked with them for a while, just get up and start to walk out. Most of the time, they will stop you in your tracks and let you know that they may be able to get you a better price. You have all of the leverage in these negotiations and you should never forget it. 

2. Shop at the End of the Month

When you go out into the market at the end of the month, you will usually be able to secure a much better deal than normal. While this might not make sense to some people, anyone that has worked in sales could confirm this fact for you. Operations that rely on sales departments to bring in the money have budgets that they work off of. When the sales department hits their budget, everything is better for them. Managers get bonuses and everyone makes more money.

When sales budgets are not hit, management starts to get in a bad mood. Therefore, if you are a customer at the end of the month when they have not hit their budget, they will most likely throw extra incentives at you to close the sale. Take advantage of their sales budgets if you can.

3. Ignore "Sales"

Sometimes, manufacturers have dealer incentives such as rebates. Other than that, most "sales" that you hear advertised are just a bunch of hype to get you in the door. Do not ever feel pressured to sign a deal just to get the "sale" price. If they can do the price for you today, they can still do it for you tomorrow in the vast majority of cases. 

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How to Renegotiate a Car Lease

Whether you renegotiate a car loan or renegotiate a car lease, the process is essentially the same. You are asking your finance company for changes to a contract. In most cases, you are asking for changes that will benefit you and not the finance company. As a result, you will need to provide accurate and reasonable information to substantiate your request. 

Hardship Renegotiation

Perhaps the easiest form of renegotiation is a hardship request. In this scenario, the leaser has come into a financial emergency that will prevent him or her from continuing payment. The finance company evaluates this situation to determine if it can adjust terms of a lease to keep the contract alive while still saving itself from loss. If you have been laid off, experienced injury or illness, gone through a divorce or otherwise altered your ability to make payments, you can use this as a way to renegotiate your car lease. The finance company may offer lower payments in exchange for a longer lease. The finance company may also offer you a trade-in for an older model car that is more affordable.

Market Adjustment

It is much harder to get a finance company to adjust a lease due to current market conditions. For example, if you leased a car right before the car market bottomed out, you may be paying for too much for your lease. Today, you could go lease the exact same model for much less. Unfortunately, the lender is thrilled with your contract when you are not. Getting the leasing agent to agree to a term adjustment will require proof that you can exit the lease, find a new car, accept any fees for doing so and still save money. In this case, the leasing agent could stand to lose your business, and the company may be willing to negotiate.

Extension of a Lease

When your lease expires, you may want to extend it another few years. In this case, you should look for a dramatic drop in the lease cost because you are actually leasing an older model with more miles on it. Compare the cost of the lease quote to extend the program to the cost of purchasing the car out right. Remember to compare the cost to that of leasing a new car altogether. Use these comparisons to negotiate for the right price on your lease extension.

Early Termination of a Lease

Getting out of a lease early is much harder than extending a lease. If you no longer desire to fulfill your lease arrangement, you will have to pay a fee to turn the car in early. This can be called a "voluntary" repossession of the vehicle. The leasing agent may report this as a repossession to your credit score. To avoid this negative consequence, ask if you can take steps such as delivering the car yourself and paying a penalty. The cost of the penalty may be much less than the ultimate cost of having a repossession on your credit report. 

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How to Take Over a Car Lease

If you are planning to lease a car, you consider whether its wise to take over a car lease first. Taking over a car lease is a relatively easy thing to do with little paper work and can lead to savings. For one, you do not have to make a down payment to the car leasing company. Next, you are not stuck with a long lease period. By taking over a car lease, you get to test drive a car for a couple of years before turning it in. This way you can try new cars all the time or more frequently than if you opt for a standard car lease.

Step 1- Check the Condition of the Car

Check if the car is in good condition. If you live far away from the car, get a third party inspector to conduct the inspection for you. Once you are satisfied that the car is in good shape, proceed to the next step.

Step 2 – Approval of Lease from a Leasing Company

The first step (after checking the condition of the car) is to obtain pre-approval of the lease from a leasing company. This process is just the same as obtaining a pre-approval for a home loan. You will be required to fill in salient details and if your credit rating is good, you will be able to get the pre-approval. Please note that it is important to have a good credit rating to obtain a lease on transfer as well.

Step 3 – Transfer Existing Car Lease

Next, you need to scout around for some one who wants to transfer an existing car lease. There are many companies and brokers that facilitate this process. View photos of cars and models you are interested in and zero in on the car that suits you the most.

Once you have a potential car for lease take over, check the remaining mileage the lease offers and see if this suits your driving habits.

Taking Over Car Lease

Get the seller of the lease to contact the car leasing company and inform them that they would like to transfer the lease to you.

The car leasing company or the dealer will then contact you and send both you and the seller copies of contracts that you have to sign.

Once that is done, the dealer will contact you again asking you to assume the lease. Once you do so, the seller will be informed of the fact and will hand over the car to you.

Before all this happens make sure you do your due diligence in detail. There is no point in ruing the deal after the transfer of the lease is through. It is before you contact the dealer that you need to verify the mileage left on the lease and the condition of the car you are planning to lease.

Unlike a normal lease that lasts for five years and requires a down payment, a lease transfer can be obtained for two years or sometimes even one year. There is no down payment either. So you save a lot of money. However, the leasing company has to agree to the transfer of the lease. This is where your credit rating comes into play. Once the leasing company agrees to let the lease be transferred, your deal is a s good as through.

Some leasing companies hold the original lease holder responsible for the payments due even after the lease has been transferred. Though this is good for the buyer of the lease, it is not such as good deal for the seller of the lease.

Some lease companies also do not let the transfer take place toward the end of the lease period or at the very beginning of the lease period. Do check these details before you ask for a transfer of the lease in your name.

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