Liberty Auto Loan: Auto Loans with Bad Credit made simple!
What do you do when you don’t have enough money to buy a car? You borrow it. At least, that’s the most common solution, which is, actually, a sad statement on how most people deal with the fact that they can’t afford something. We have created a credit dependent society where people are not using credit to make the cost of car less painful. People are using credit to buy cars they just, plain, can’t afford. The result is a record number of consumers living with bad credit, and they continue to secure auto loans with bad credit in spite of the fact that bad credit car loans cost more, and push bad credit scores down.
How to fail with credit is easy – you just accrue more debt than your income can support. Pre-approved credit cards arrive in the mail every day, even if your credit sucks. The cards keep coming and the thought of having more money to spend overrides the reality that you don’t have money to spend. The ripple effect destroys your credit and, when you need to buy something important on credit, your credit rating denies that possibility – unless, you manage to score some ridiculously expensive financing deal. Then you’re all set to plunge further into debt.
If you’ve put yourself into the position of needing bad credit car loans, you’re failing with your credit and you need to fix the problems that are making your debts erase your savings. But, what exactly is bad credit? In terms of your credit scores, if you fall below 620, you’re entering bad credit territory. While there are many degrees of bad credit, while still having any credit, all bad credit scores share one thing in common – increased lending costs.
Who sets credit scores? The principal source for credit scores, that is, the scores used most often by lending institutions, are those calculated by TransUnion, Equifax, and Experian, the three main credit reporting bureaus in the U.S. These companies have developed the most accurate methods for calculating the odds on any borrower failing to pay off a loan – yes, odds. A loan is something of a gamble and there are predictors for determining who will bring the biggest risk to a loan. To arrive at these scores, the credit reporting bureaus use several variations on methods of calculation created by FICO, the Fair Isaac Corporation. Based in your credit activity, the FICO system analyzes the data to create of profile of credit-worthiness expressed as a three-digit number from 300 to 850, 300 being the worst.
Each of the credit bureaus use their own proprietary methods for arriving at your scores and, even though they all use one of the FICO systems, each has their own methods for setting scales and determining values. This results in each bureau having its own set of values for your scores making it necessary for you to obtain all three in order to get the information your lenders will need when you apply for a bad credit car loan. How bad your bad credit is may be subject to opinion. Each lender you go to will set its own standards on bad credit in order to affix interest rates. This makes it all the more important that you know your credit score in advance of applying for a car loan. You shouldn’t take anyone else’s word for how bad your credit is.
If your credit falls below non-prime, or average credit, you might be able to qualify for a loan with interest rates very near to what people with non-prime credit typically pay. This depends, of course, on your selection of cars, how much you’re willing to put up as a down payment, and your income. While income does not factor into your credit scores, being able to present proof of a steady income to a lender indicates you can afford the burden of a loan. A large down payment, say in excess of 20%, not only takes a chunk out of the balance you’ll paying interest on, it’ll let the lender know you’re serious about your investment. Realistic expectations on the car you’re wanting to finance will also indicate your responsible behavior in the face of financing a car with bad credit.
A car loan will have a significant impact on your credit scores. First, if lenders have to investigate your credit, you will suffer a drop in scores. To counter this, you should get a current copy of your annual credit report, which you can order, for free, from any of the credit bureaus or from AnnualCreditReport.com. This is a detailed list of your credit/bill-paying activity and it will give any lender a clear picture of how you handle your finances. If you pull your credit report, there is no effect on your credit scores. Only when a third party is left to pulling your credit, do you lose points.
Your scores may also go down as a result of simply getting approved for the loan as this adds another debt. Though a new line of credit can have a positive impact on your scores, having a new account on which you owe money will cause a drop in your scores. As you accrue debt, the load will be reflected in your credit scores until you make headway in paying off the loan. Damage to your credit score is not permanent, and you start to see a turnaround in your scores.
The positive effect on bad credit with your car loan will build as you make all payments on time. When you complete the loan, you can actually slide out of the realm of bad credit, into the average credit world. Good credit takes more time and requires more effort than paying off a car loan can accomplish. There are things you can do to improve your credit status while you’re paying off your car loan. These revolve around a certain amount of sacrifice, but you probably landed in bad credit straits by living beyond your means.
Reigning in your spending is the first place to start. Set a budget and put yourself on an allowance. Allocate some cash for yourself to use for the week. When you use up that cash, stop spending. One of the sure paths to bad credit is whipping out the plastic every time you buy a cup of coffee, or a burger. Pay your debts. Whatever is left hanging out on your credit cards should be paid off as quickly as possible. If it means giving up a trip to the movies, restaurants, or bars, then give them up. They’re expenses you don’t need and should be dumped in favor of getting your debts paid.
Each credit car you pay off means an improvement in your scores. But, don’t close those accounts as that will have a negative effect on your scores. Closing an account that’s paid off reduces the lines of credit you have open. Since a portion of your credit scores are based on the number of accounts you have open as well as the diversity of accounts. Paying off cards reduces your debt load, thus improving your credit, but having that credit available will also help to keep your scores up.
Improved credit scores and a successfully handled bad credit car loan will help to make any future financing cheaper. If you go to the same lender for your next car loan, you can usually expect lower interest rates, especially if you’re sporting a better credit score. When it comes to finding the right financing for a bad credit car loan, where to start can be a bit overwhelming. Liberty Auto Loan can take some of the hassle out of it by giving you access to a nationwide network of lenders and car dealerships. When shopping is made easier, the consumer is more likely to spend money wisely. That’s the goal of LibertyAutoLoan.com – easy choices, wise decisions.