Consumers with less than perfect credit should not confuse rent to own auto loans with new car leasing or even loans that can establish their car credit

Credit repair

Credit-challenged car buyers needing a bad credit car should understand why a rent to own program won’t help their credit situation while some other finance programs will.

We understand their confusion here at Auto Credit Express because for over two decades we’ve been helping applicants with low FICO scores find a dealer that understands these credit situations. We even designed our website so that people with poor credit can review issues such as bankruptcy and income requirements as well as today’s topic, understanding the difference between the loans our dealers offer and those who advertise rent to own cars.

Car leasing

With traditional new car leasing, the payments are lower than retail auto financing because you’re only paying for the portion of the car that you use.

This means that for a 2 year lease, you’ll pay 24 months of interest charges plus the vehicle’s depreciation during that same period.

Since a typical new car lease doesn’t require a down payment, the person leasing the vehicle is usually “upside down” (the vehicle is worth less than the buyout) during the entire lease term. As a result, lenders consider leasing to be a higher risk than retail financing and usually offer this option only to the most qualified applicants – customers with very good to excellent credit.

Rent to own

Rent to own cars, on the other hand, are similar to a typical buy here pay here finance program. As such, loans taken out at a rent to own car lot require a down payment plus a fixed number of weekly or bi-weekly payments (with a small buy-out at the end of the contract). Like in-house financing programs, these payments are usually made in person at the lot where the car was rented.

Customers who fall behind in payments or who encounter other issues deal with the rental company regarding any payment arrangements. Failing to follow the terms of the rental contract will result in the rental company repossessing the car.

Like most tote the note dealers, the rental company has the option of whether or not to report loans and payments to the credit bureaus. Most do not. Not only that, but the vehicles available for rent are typically older used cars because most of these rental agencies are not franchised new car dealers.

The good and bad

Good:

•    Most rental vehicles are in the moderate to lower-price range and some people actually prefer to make payments on a weekly basis.
•    Rental payments are made face to face so you know your agent.
•    Many rental companies won’t run a credit check before renting you a car.

Bad:

•    Rent to own car companies typically won’t report loans or payments to the credit bureaus.
•    Because these rental vehicles are usually older, many are not that reliable. In addition, for many people, it’s usually not convenient to visit the rental agency every week to make a payment.
•    Rental terms typically range from 12 to 24 months, limiting the vehicle selection to lower-priced, older cars.

As we see it

Car buyers with poor credit scores shouldn’t confuse the term “rent to own” or dealers offering used car leasing with traditional new car leasing.

If you’re interested in cheap transportation without a credit check, then the rent to own cars dealer wins. But even with a credit score below a 640 FICO or a credit rejection from a traditional lender, you should only consider a rent to own or buy here pay here dealer after you’ve checked out another option.

We offer that option here at Auto Credit Express where we’ll help you locate a dealer for your best chance for an auto loan approval that can help rebuild your car credit.

So if you really want to get your auto credit on track, you can begin now by filling out our online auto loans application.

Why down payments are required and how they can help if you are applying for a problem credit auto loan

What we can tell you

Credit-challenged loan applicants often don’t understand the importance of a down payment even as they are exploring different approaches on how to clear bad credit.

We know this to be a fact because at Auto Credit Express we’ve been sending car shoppers with less than perfect credit to dealers that can help them for the last two decades. It’s also why our website features tips on issues from tote the note auto dealers to today’s topic, what type of down payment you’ll need for a car loan if you have low FICO scores.

Down payment

Nearly all non-prime lenders require car buyers to have a down payment in the form of cash or actual trade equity. For the most part, they do this because they see it as a way to increase the odds that a borrower will make regular, timely loan payments. Here’s why:

•    With little or no money invested in a vehicle, especially during the early stages when it’s worth less than the loan balance, it’s fairly easy for a borrower to just walk away from a loan.

•    With a down payment of 10% or more invested in a vehicle, it’s far more likely the borrower will continue making loan payments.

But even from a borrower’s point of view a down payment can help by:

•    Lowering the monthly payment by reducing the loan amount. The larger the down payment, the lower the monthly payment.
•    Helping to shorten the loan term. Instead of lowering the monthly payment, you can use the down payment to reduce the loan term by, for example, financing it for 48 months instead of 60 months. This also reduces the time the vehicle is worth less than the payoff – known as “negative equity.”

Just as importantly, a down payment also reduces the total amount of interest paid. This is especially important with the increased interest rates associated with high-risk auto loans.

One final point

With any car loan, but especially those for people with poor credit scores, a down payments is an important way interest costs can be reduced. Another plus is that it may also enable you to trade out of your car sooner and into another loan with a lower interest rate.

Finally, at Auto Credit Express we work with dealers that understand a broad range of credit issues and can offer you your best chance for approved auto loans.

So if you’re ready to establish your car credit, you can begin now by filling out our online car loans application.

Latest findings from Equifax show new credit at its highest point since 2008

Lending news

Credit-challenged consumers should be interested in some of the findings from the March National Credit Trends Report from Equifax.

This information could be especially helpful if you’re planning on applying for no credit auto loans. And we should know because here at Auto Credit Express we’ve spent the last two decades helping car buyers with poor auto credit find a dealer for their best chance at approved auto loans and why our website explains such topics as credit report errors and repossession as well as today’s news about the current lending climate from Equifax.

Credit trends

We feel it’s important for people with less than perfect credit to understand the current lending environment in the auto loan industry before applying for a loan, which is why the latest information from Experian could prove to be helpful.

On May 1st, the latest monthly National Credit Trends Report noted that, “The credit landscape continues its consistent recovery heading into the second quarter of 2012, with the exception of home finance.”

According to Equifax Chief Economist Amy Crews Cutts, “Lower delinquency rates and fewer write-offs coupled with the growth of new credit across multiple sectors clearly outlines the increased activity of consumers and their renewed faith in the marketplace heading into the second quarter.”

Auto loans

The report also specifically addressed car loans. This is what it had to say:

•    Auto loan and lease balances rose to a post-recession high of $727.5 billion in March 2012.
•    Auto finance loans totaled more than $380 billion — the highest since Q3 2009.Delinquency rates among all auto loans are at their lowest point in five years.
•    Auto sales are rising fast and new auto loans to pay for them are also growing.  New auto loans obtained from banks in January 2012 rose to 728,000 accounts, up from 630,000 a year ago, while new auto loans from finance companies grew to 753,000 accounts from last January’s 735,500.

Subprime auto lenders

Considering this latest information, it could have the following effects on car loans for people with low credit scores:

•    Lending will continue to improve, although interest rates for high-risk loans typically won’t be dropping and down payments will still be required by most near-prime and lower tier lenders.

•    With more customers with weak credit requesting auto loans, lenders can still afford to be selective in the approval process.

With that in mind, applicants should follow these tips:

•    Know the information in your credit report and your FICO scores.

•    Choose an affordably-priced car with a monthly payment that’s no more than 10% to 15% of your gross monthly income (the lower the better).

•    The higher the down payment, the better. Not counting rebates or dealer cash, 15% or more will increase your chances of an approval.

As we see it

As a car loan applicant you should be aware of what is going on in the auto lending industry. Also, even if you’ve been turned down for a conventional car loan it doesn’t mean your only choice is a tote the note dealer.

If you apply with us, Auto Credit Express will forward your application to a dealer that understands your situation and can offer you your best chance for an auto loan approval.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.

What it might take to find something other than a buy and pay here dealer if you have less than perfect credit

Our involvement

If you’re someone who is credit-challenged there’s a good chance you might have a problem finding anything other than a dealer that does in-house financing.

We know this is the case because here at Auto Credit Express we’ve been helping applicants in many of these credit situations since 1992. In fact, our website is even designed so that people with poor credit can check out our resources section to understand such issues as credit repair and credit disability insurance as well as today’s topic, finding a dealer that’s willing to help you if you have low credit scores.

The right dealer

While hundreds of dealerships advertise that they offer bad credit car sales, a good many of them turn out to be tote the note dealers – places that don’t report loans to the credit bureaus. Taking out this type of loan might mean you’ll have transportation, but your car payments won’t show up on your credit reports which means you’ll be in basically the same credit situation the next time you need a vehicle.

Another reason to avoid these types of dealers is that most are small used car lots not affiliated with a new car franchise. This means the vehicles they typically sell are older, high-mileage cars that are often unreliable. If they have warranties, they’re usually very limited and cover just a short time period.

At the same time many new car dealers don’t want the hassle of dealing with customers that have near-prime or lower credit scores.

Unlike regular new car financing, working with subprime auto lenders requires special training for dealership employees. Dealers also have to stock the right kinds of cars. As a result, many new car dealers don’t have the experience or patience to support a special finance department and stock the right types of vehicles.

Car buying habits

The internet has not only changed the way shoppers with good credit buy cars, but also the way those with past credit issues can find a dealer that will work with them.

Websites such as ours match the needs of these customers with dealers that work with a broad range of lenders.

For customers with credit problems, these franchised new car dealers offer a number of advantages over buy and pay here dealers:

1.    You’ll choose a vehicle from much larger inventories.

2.    Because of strict lender requirements, these vehicles are either new or newer used cars with lower miles.

3.    Typically these cars are eligible for extended warranties covering most of the loan term, helping you avoid potentially high repair bills.

4.    By reporting to the credit bureaus, making timely payments will help establish your car credit while helping raise your FICO scores.

We’re here when you need us

Quite simply, here at Auto Credit Express we help people that are experiencing car credit difficulties find a dealer for their best chance at an auto loan approval.

So if you truly want to get your auto credit on track, you can start the process now by filling out our online auto loans application.

How credit disability insurance might help even when financing with poor credit car loans

More loan options

Even with less than perfect credit it sometimes makes sense to add credit disability insurance to an auto loan.

We really do understand the decisions you’ll have to make here at Auto Credit Express where we’ve spent the last twenty years helping car shoppers with low FICO scores find a dealer that can help them get approved auto loans. It’s also one reason our website explains such issues as credit life insurance and buy here pay here loans as well as today’s topic, understanding credit disability insurance.

Credit disability

Sometimes just called “disability” or “accident and health insurance”, credit disability insurance is designed to make your car payments if you are unable to work due to sickness or injury.

If you are injured or become sick, the waiting period for benefits to begin is anywhere from 14 to 90 days from the onset of the disability, depending on the policy. Once this time has elapsed, the insurance company will begin making car payments. Typically, but not always, payments are retroactive to the day the disability began. Permanent disability is not a requirement to receive these benefits.

If you want disability insurance, you usually have to request it before you sign the loan documents. The monthly premium is based on the amount financed as well as the type of coverage you choose. The cost is added to the amount financed, increasing the monthly payment.

The good and the bad

Like credit life insurance, only you can decide if you need this coverage. Here are some things to think about:

The good:

1.    Peace of mind – your car payments will be covered if you become either temporarily or permanently disabled
2.    One payment – the insurance payment is part of your car payment so there is no additional monthly bill you need to pay.

The bad:

1.    Cost – These policies can be more expensive than if you were to take out a separate policy for the loan amount.
2.    Interest expense – since it’s part of the loan, you’ll be paying interest on the premium every month – something you wouldn’t be doing with a separate disability policy.

The Bottom Line

Whether your credit scores are high or low (the policy cost is the same), only you can decide if you need credit disability insurance coverage on your auto loan. But keep in mind that if a disability would seriously affect your chances of keeping your car, you might want to compare the costs versus benefits of this type of insurance.

You should also know that Auto Credit Express will forward your credit application to a dealer that understands a wide range of credit situations and can offer you your best chance for an auto loan approval.

So if you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.

Once you receive a loan approval for a bad credit car you may have to decide whether or not you need credit life insurance

Loan options

Even with poor credit it sometimes makes sense to add credit life insurance to a car loan.

This and other choices you’ll have to make are well understood here at Auto Credit Express where we’ve spent the last two decades helping car buyers with poor credit scores find a dealer that can help get them financed. It’s also why our website offers information on domestic cars and tote the note loans as well as today’s topic, understanding credit life insurance.

Credit life

Sometimes just called “credit life”, credit life insurance is essentially decreasing term life insurance.

“Decreasing” means that the policy payout is designed to cover the loan balance at any given point in the loan term. As the loan is paid down, the amount owed decreases with the amount of insurance covering it also decreasing, matching the balance.

“Term” means that the policy covers a fixed period, is non-renewable and, incidentally, also builds no cash value (you can’t borrow against it). Its cost also doesn’t increase even if your FICO scores are low.

How to buy

If you decide you want credit life insurance for you’ll need to choose it at the time you sign the loan documents. The monthly cost is based on the beginning loan balance and the premium is added to the amount financed, increasing the monthly payment amount.

The good and bad

The fact is, only you can decide if you need credit life insurance. Here are some things to think about:

Good:

1.    Peace of mind – if you should die before the loan is paid, the insurance coverage will pay the remaining balance and your estate won’t be responsible for any balance due
2.    One payment – since the insurance premium is in your car payment, there is no additional bill you need to pay.

Bad:

1.    Cost – typically, credit life insurance is more expensive to buy than a comparable decreasing term life policy.
2.    Interest expense – because it’s part of the loan, interest is being charged on the policy cost.
3.    If you’re single – if there is no co-signer and you’re single, even if you were to die your family cannot be held responsible for the loan balance.

The Bottom Line

Only you can decide if you need credit life insurance. If you have a family or a co-signer and you’re concerned about their ability to make the payments, then first check the cost of a decreasing term life insurance policy before signing up for one that will be rolled into a car loan.

You should also know that at Auto Credit Express we assist people with less than perfect credit in finding a dealer that understands their credit issues and can offer them their best chance for approved auto loans.

So if you’re one of these people and you’re ready to reestablish your car credit, you can begin now by filling out our online car loans application.