Credit challenged individuals that either pay or receive child support may find it difficult qualifying for an auto loan

The facts

If you are someone who’s responsible for or receives child support income you should be aware of how this will affect your application for an auto loan, especially if your credit scores are poor.

We know this to be the case because since 1992 here at we’ve been helping applicants with less than perfect credit get approved for a car loan. Our website, in fact, is even designed so that individuals who have been turned down for conventional auto financing can better understand the subprime car loans process that includes today’s topic, how child support can impact qualifying for a loan in the first place.

Child support income issues

To begin with, lenders who deal with high-risk car buyers have a problem from the very start if all or even some of their income is a result of child support payments. The main reason it’s an issue is because child support income cannot be garnished.

This means that if someone with child support income has their car repossessed, the lender can’t get a court order to take that particular income to pay off the loan. As a result, these lenders are especially careful when considering applicants with child support income.

But there are at least two situations when these lenders typically might consider someone with this kind of income:

1) If the borrower has additional income from a job or other source that can be garnished (the longer the job time and the higher this income, the better the chance for an approval).
2) If there are contributing factors such as long-term residence stability and “situational” versus “habitual” poor credit (when the situation is

a result of a single issue, such as a medical problem, instead of a history of never paying bills on time), this can also help increase an applicant’s chances.

Proof of child support income will also be required. In most cases, copies of the court order or divorce decree stating the amount and length of the payments will need to be provided to the lender.

Child support payment issues

If someone is required to make child support payments and they’re behind, it’s also difficult to get an approval. The reason is simple: people in this situation tend to change jobs frequently. As a result, when the court finds them at an employer and begins to garnish their paychecks to cover back payments, they leave and look for another job just to avoid garnishment.

A judgment for delinquent child support payments also appears on credit reports. After reviewing this information, most lenders will automatically reject the application.

But even in this case, it’s possible something can be done.

If a delinquency exists but arrangements have been made with child services to catch up and this can be proven with written documentation from either child services or the court, then some lenders will still consider the loan application.

As we see it

Child support income or payment delinquencies can be a problem with any car loan, but they’re even bigger issue for people with low FICO scores. To improve the chances for an approval, bring in the proper documentation during the first visit to the dealer.

Also understand that at Auto Credit Express we assist people with credit issues in finding a dealer that can offer them their best chance for an auto loan approval.

So if this is your situation and you’re ready to reestablish your car credit, you can begin now by filling out our online car loan application.

Having bad credit usually limits the number of ways you can apply for an auto loan

Where to begin

If you’re credit-challenged, how and where you apply can often mean the difference between driving that new car and being denied credit.

We’re very familiar with this issue here at Auto Credit Express because we just happen to have spent the last twenty years working with car buyers with poor credit. Our website is even designed so that car shoppers with low FICO scores can research such topics as repossession as well as today’s subject, the best way to apply for an auto loan especially for buyers with less than perfect credit.

With that, there are typically three ways car buyers, regardless of their credit standing, can apply for a loan.

The direct method

The first option is applying directly with a lender. Visiting a bank and applying with a lending officer or going online to the lender’s website are just two of the ways this can be done.

Both will work if you have good credit, but if your credit scores fall below a 640 FICO it’s not that simple.

Because nearly all subprime auto lenders have documentation requirements (employment and income to name just two) most lend only indirectly through franchised new car dealers. This being the case, applicants needing these types of loans will find that applying directly will not only be difficult, but with the limited choices they could end up with a much higher interest rate.

The indirect method

A second choice car buyers have is applying indirectly for a car loan at a dealership. This also works if you have good credit, since you compare the dealer’s rates with those offered by area banks and online.

If your credit scores aren’t that great, however, this can be a hit-or-miss situation since not all new car dealers are interested in helping customers with credit issues.

Targeted web site method

For buyers with credit problems, a third option is applying online at a specialized web site that caters to people with challenged credit. The chances of getting approved with this method depend upon the size of the site’s dealer network and its transparency.

The bigger the network, the better your chances are of finding a dealer.

Transparency, on the other hand, has to do with the website, itself. Is the online credit application secure? Does the company belong to the Better Business Bureau and, if so, what is its reputation? Is there a resource section where you can learn about the loan process along with finance calculators to help you determine if you even qualify for an auto loan?

Last but not least, is there a toll free number you can call where you can to speak to an in-house customer service representative and have your questions answered?

If it doesn’t have all these features, you might want to consider one that does before submitting your personal information.

When we can help

The Auto Credit Express web site will assist you in finding 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 application.

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.