Available income

Credit-challenged buyers will find that it’s the income after expenses that will qualify them for approved auto loans.

We’re well versed in this as we’ve spent the last two decades involved in bad credit auto sales here at Auto Credit Express. We even created a website so we could share information regarding tote the note loans and credit unions as well as today’s topic, the budget requirements of terrible credit auto loans.

DTI

After receiving your credit application from the dealer, one of the first things a bad credit lender will do is determine your debt to income ratio (DTI). You can do this, too.

Start by counting up all your regular monthly bills including mortgage or rent payments, credit card payments, loan payments, average utility payments and anything else (such as student loans or child support).

Next, divide this amount by your gross monthly income (what you earn before taxes and other deductions). This will show you your monthly debt percentage. Bad credit lenders normally cap your total monthly debt (adding in a car payment plus car insurance) at 50% of your monthly gross income.

PTI

At the same time, most lenders that offer bad credit car loans will not want your car payment (with insurance) to exceed 15% of that gross monthly income figure. This is known as a payment-to-income (PTI) ratio. This means that with a gross monthly income of $3,000, a combined car and insurance payment can’t exceed $450. Since most lenders assume $100 for car insurance, this leaves a budget of $350 or less for a car payment.

Budgeting additional expenses

When you compute your vehicle budget, be sure to include expenses for gas and both normal and unexpected maintenance costs – which brings up another point.

If you are thinking of buying a used car without a service contract (extended warranty), plan on setting aside funds each month to cover the possibility of repairs.

The alternative – purchasing a service contract that covers the entire loan term – means you’ll be guarding against most unforeseen expenses caused by mechanical problems that might otherwise cost you hundreds or even thousands of dollars.

As we see it

By understand the way lenders compute your DTI and PTI, you can determine, before you apply, if you meet the basic requirements for bad credit auto loans.

If you do meet the basic requirements we want you to know that Auto Credit Express places customers that have bad car credit with dealers that specialize in approved auto loans for a wide range of credit situations.

So if you’d like us to help you get your auto credit back on track, you can begin now by filling out our online auto loans application.

As a cosigner for a problem credit auto loan you need to understand that a divorce decree is a form of outside agreement.

We actually do understand due to our involvement for the last two decades in bad credit car sales here at Auto Credit Express. It’s also why we designed our website so that applicants could research issues such as the horrible credit auto loans process and loans after bankruptcy as well as today’s topic, the impact of divorce on a cosigned loan.

A divorce decree

We sometimes receive questions regarding divorce decrees that make one of the ex spouses solely responsible for a car loan that was originally cosigned.

Usually, if the spouse that was made responsible for the loan isn’t making payments, the other original cosigner wants to know if this will affect his or her credit history and FICO scores – especially considering they’re listed in the divorce papers as no longer responsible for the loan.

So here goes:

Outside agreement

When a loan is approved, it’s based on the information provided in the loan application. Once the loan documents are signed, the agreement is then considered to be a binding contract.

Due to this pre-existing agreement, even if a judge rules that only one spouse is responsible for a bad credit auto loan that and enters that stipulation into the divorce decree, the lender can still hold both signers jointly and individually responsible for the loan.

In this case, the divorce decree is an outside agreement that was made after the loan was executed. Since the decree is not part of the loan contract, both spouses continue to be responsible for all loan payments.

As a result, if any loan payments are late or if the vehicle is repossessed, this information will be reported to the credit bureaus under the social security numbers of both individuals and will lower the credit scores of both. In addition, the lender can legally collect any remaining contract balance, plus all fees, from either or both co-signers.

The Bottom Line

If you are involved in a divorce and have joint accounts with your soon-to-be ex, be sure to close those accounts and pay the balances on time. Better yet, before the divorce is final, be sure all joint loans are refinanced under an individual name – making just one person legally responsible for each loan.

And remember that Auto Credit Express specializes in placing applicants with bad auto credit with dealers that can offer them their best chance at getting approved for no credit auto loans.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

Credit-challenged buyers financing with terrible credit auto loans are especially wide open to being sold a used car that’s unreliable or has hidden damage.

We know because we’ve heard from people this happened to during the two decades we’ve been associated with bad credit auto sales here at Auto Credit Express. We even developed a website so we could share information with applicants covering topics from credit reports to car loans during bankruptcy as well as today’s topic, avoiding financing a bad credit car with a branded title.

Used cars

A used car is typically the best choice for a bad credit car loan because, according to Consumer Reports, new cars can lose up to 47 percent of their value in the first three years. This makes buying used cars both a smart as well as an affordable decision.

But buying used also carries a greater risk that the car you’ll be financing isn’t what the seller states it is.

A recent Experian Automotive study found that “more than 2 percent of the late-model used vehicles (model year 2005 and newer) had a negative vehicle history event (frame damage, salvage, odometer rollback, etc.), which can significantly impact the vehicle’s value.”

The report also noted that “more than 3 percent of financing outside of prime had negative vehicle history” which means that bad credit buyers are even more at risk.

Upcoming California law

Fortunately for credit-challenged buyers in California, help is on the way in the form of a new state law that will take effect on July 1st of this year.

AB 1215, sponsored by California Assemblyman Bob Blumfield changes the current laws in a number of ways. It does allow auto retailers to raise documentation fees on retail purchases and leases. But more importantly, it also requires dealers to run vehicle identification numbers through the National Motor Vehicle Title Information System to check whether the auto has a branded title.

If the report turns up that it does, a red window sticker has to be affixed to the vehicle warning buyers of the auto’s history.

“Buying a car comes second only to the commitment that comes with buying a home,” Blumenfield said.  “With working families striving to stretch their dollars in this tough economy, there couldn’t be a better time to help ensure that family cars are a good and safe investment.”

The Bottom Line

Although the only guaranteed way to prevent buying a previously wrecked or damaged car is a thorough vehicle inspection by an ASE certified master mechanic, the new California law is a good first step in informing buyers of potential problems.

Another way you can help yourself if you have bad credit is knowing that Auto Credit Express places customers with bad car credit with dealers that specialize in approved auto loans for a wide range of credit situations.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

Bad credit buyers financing with a problem credit auto loan have, as have other buyers, been contacted by fraudulent call centers representing themselves as warranty companies.

We’re aware of this happening to customers more than a few times during our two decade involvement with bad credit car sales here at Auto Credit Express. It’s also a reason we constructed a website – so applicants could research issues such as FICO scores and repossession as well as today’s topic, purchasing an auto service contract that some buyers call an “extended warranty”.

Auto service contracts

Even with the quality of used cars better than ever, we usually suggest buyers considering purchasing a service contract covering the entire term of bad credit auto loans.

Because if you’re on a tight budget and have bad credit it’s important to avoid large, unforeseen vehicle expenses – because these situations are a big reason many horrible credit auto loans end in repossession.

We also encourage buyers to purchase one from the selling dealer for a number of reasons – not the least of which is they’ll be covered by the consumer protection laws of their state.

Service contract scams

Regardless of your credit, as soon as you buy a car there’s a good chance you’ll be swamped with letters and phone calls from companies that want to sell you an “extended warranty” and many will do almost anything to get you to sign up.

Quite a few of these call centers are located in and around the St. Louis, Missouri area, which prompted the State of Missouri Attorney General’s office to conduct an investigation over two years ago that resulted in a state law passed last year.

Missouri Senate Bill SB132

Describing the state of Missouri as “becoming a hotbed for deceptive direct mail and telemarketing campaigns”, the Service Contract Industry Council (a group of prominent manufacturers, insurers, retailers, providers and administrators of service contracts representing 80 percent of the industry) worked closely with the Missouri Attorney General’s office to draw up legislation that was signed into law last July.

Here are some excerpts from the SCIC press release:

Missouri Senate Bill SB132 is the result of the State Attorney General’s Task Force on the Motor Vehicle Service Contract Industry, which convened over a year ago.  The law is designed to prevent companies from using deceptive or unethical marketing practices to sell motor vehicle service contracts, also known as auto extended warranties. The new law took effect January 1, 2012.

“The SCIC worked closely with Missouri Attorney General Chris Koster to investigate and address misleading marketing practices of select St. Louis-based companies, including US Fidelis,” said Timothy J. Meenan, executive director of the SCIC.  “At the urging of the SCIC, specific language in the bill prohibits individuals or companies from engaging in false, deceptive, or misleading conduct with respect to a motor vehicle extended service contract program, and authorizes restitution to any victims.”

The SCIC collaborated with the Attorney General’s Office to draft a bill that more clearly specifies consumers’ right to a refund if they cancel a motor vehicle service contract.  The SCIC model language also requires consumers to receive a copy of the terms and conditions of a contract prior to sale.

In addition, the SCIC worked extensively with Assistant Attorney General Doug Ommen to create a new licensing framework for Missouri-based businesses and individuals selling motor vehicle service contracts.

As we see it

Buyers should not purchase any service contract until they’ve researched the company. In addition, buying a warranty from the selling dealer means that if there are any issues, you’ll know who to contact (licensed car dealers also must adhere to their state’s consumer protection laws).

Regardless of where you buy it, be sure to shop around before you buy to make sure the service contract is competitively priced.

Auto Credit Express specializes in placing applicants with bad auto credit with dealers for their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

Before filling out an application for terrible credit auto loans there are some basic requirements you should be aware of.

We are familiar with all of them because for over twenty years we’ve been associated with bad credit auto sales here at Auto Credit Express. A website we created shares our expertise on issues ranging from tote the note dealers to cosigning loans as well as today’s topic, the basics of poor credit car loans.

FICO scores

To start with, you should know your credit scores. Most bad credit lenders deal in the FICO score range of 500 to 640. Anything more than a 640 is typically considered near-prime, while prime starts around 720. Although nearly all bad credit lenders loan to near-prime customers, credit unions, captive finance companies and a few banks are noted for offering these customers better interest rates.

Secondly, you can’t be a credit “ghost”. Lenders check how long you’ve been using credit. Unless you’re applying for a college grad program, having a credit history of at least 3 years is usually considered a minimum. An advantage is having at least one prior auto loan.

Income conditions

Monthly income requirements vary by lender, but a $1,500 to $1,800 gross income before taxes is typically the minimum needed to be considered. The higher your income, the larger your available selection of lenders (and cars) will usually be.

Lenders then total up your monthly debts, compare this to your income, and use this ratio to determine if you have enough income available to qualify for an auto loan plus car insurance.

Bad credit lenders also typically require that your total debt, including a car payment, not exceed 40% to 50% of your monthly gross income. In addition, most lenders prefer a monthly vehicle payment that’s less than 15% to 20% of your total income.

Down payment

Generally all bad credit lenders will require a down payment, either in cash or actual trade equity because customers with money invested tend to keep up with their monthly payments. A down payment of 10 percent is typically considered to be the minimum – with larger down payments increasing the chances of a credit approval.

Vehicles

Most bad credit lenders will not let you to have more than one car payment at a time. If you are currently financing a car, usually you’ll need to either pay it off or trade it in. You also won’t be able to finance a commercial vehicle, conversion van, motor home or anything with a salvage, rebuilt or other type of branded title.

Other policies

•    Job time – The longer the better. Short job time can be offset by situations such as higher income, employment in the same field, lengthy residence time or home ownership.
•    Bankruptcy – Bad credit lenders will typically not finance individuals with open or multiple bankruptcies. Only a few will consider someone currently in an open Chapter 13 and, even then, will require an order to incur additional debt from the court before reviewing the application.
•    Accuracy – Be prepared to back up application entries with proof. This is not the time to begin a career in “creative writing”.

Where to begin

Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

If all or part of your income is as an independent contractor and you have poor credit, there are things you need to understand when applying for horrible credit auto loans.

During our twenty years of involvement with bad credit car sales here at Auto Credit Express we’ve seen what can happen if you don’t understand. It’s also one reason we built our website – so applicants could research issues such as credit scores and extended warranties as well as today’s topic, how the way you’re paid can affect your application for no credit auto loans.

1099 income

Independent contractors receive a form 1099 instead of a W-2 from their employers. This income, less expenses, is then reported on a Schedule C of the 1040 income tax form.

Rules

But just because you receive a 1099 doesn’t mean you should be. The IRS looks at three things to determine whether someone is an employee or an independent contractor:

Behavioral control – if you receive extensive instructions on how, when or where to do the work, what tools or equipment to use, what assistants to hire to help with the work or where to purchase supplies and services, you are usually considered an employee. If not, you could be an independent contractor. Extensive training on how to perform the work also might suggest that you are an employee.

Financial control – If you have a significant investment in your work, if you are not reimbursed for some or all business expenses, or if you can realize a profit or incur a loss, this suggests that you are in business for yourself and that you may be an independent contractor.

Relationship of the parties – If you receive benefits, such as insurance, pension, or paid leave, this is an indication that you may be an employee. If you do not you could be either an employee or an independent contractor. A written contract may show what both you and the business intend. This may be very significant if it is difficult, if not impossible, to determine your status.

Calculating income

Because it saves them money, independent contractors sometimes further reduce their income by inflating expenses. This reduces taxes but it can also lead to problems especially if their FICO scores fall below 640.

Traditional lenders usually don’t require proof of income but this isn’t the case with bad credit lenders.

With independent contractors, the net income that appears on a tax return is the income bad credit lenders will use to qualify for a loan.

Income issues

Most bad credit lenders have minimum monthly income requirements. The net income amount is also used to determine a debt-to-income ratio as well as to compute a car payment budget. This can affect people with 1099 income in two ways:

1.    Bad credit lenders typically have minimum income requirements of $1,500 to $1,800 per month. This means your income tax return needs to show a net income after expenses of at least $18,000 to $21,600 a year

2.    Even if you net income meets this standard, your monthly debts could be high when compared to your reported income because you actual income is really more. If it is, you won’t qualify for a bad credit auto loan.

The Bottom Line

If you’re an independent contractor and have bad credit, it’s important that you correctly report your income and expenses. Doing so will give you your best opportunity for approved no credit auto loans.

Just as importantly, at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

People with bad credit must consider the total expenses of a bad credit auto loan if they want to complete the process successfully.

We understand this because for more than two decades we’ve been actively involved with bad credit auto sales here at Auto Credit Express. The website we developed reflects our experience on topics like interest rates and credit repair as well as today’s issue, choosing an affordable car once you’ve received one of the approved auto loans our dealer partners offer.

This means that once you get approved for a bad credit car you need to be aware of which ones will be more affordable to own and operate.

Kbb.com

A report on Kelley Blue Book’s kbb.com recently compared the vehicles with the best Total Cost of Ownership among cross-shopped models for both the Chevrolet Cruze and the Honda CR-V, two of the most researched vehicles on that website.

And while the CR-V as well as those vehicles cross-shopped with it is probably too expensive when financing with bad credit auto loans, both the Chevrolet Cruze and the cars that are cross-shopped against it might fit the guidelines for many credit-challenged buyers.

“With Total Cost of Ownership information, consumers can better understand the financial implications associated with the initial five years of owning a car,” said Juan Flores, director of vehicle valuation for Kelley Blue Book.  “As Kelley Blue Book’s data reveals, depending on the model’s MSRP, fuel costs and other financial factors, other models on their consideration lists could offer a greater value over time.”

Five year ownership costs

Here are the rankings of the top five vehicles, along with their five-year costs of ownership that, according to kbb.com are crossed-shopped with the Chevrolet Cruze:

Rank    Model            Five-Year Total Cost of Ownership
1    Toyota Corolla          $32,811
2    Hyundai Elantra      $34,123
3    Chevrolet Cruze       $34,705
4    Honda Civic              $36,344
5    Ford Focus                $36,591
6    Volkswagen Jetta    $36,865

Kelley also had this to say about the results:

“The Chevrolet Cruze, a most-researched car on kbb.com, has become a top-selling vehicle in its segment and for General Motors.  However, Kelley Blue Book’s data reveals that other models may offer competitive ownership costs during the initial five-year period.  On kbb.com, consumers in the market for a Chevrolet Cruze also are considering the Toyota Corolla and Hyundai Elantra.  Both models provide lower ownership costs at $32,811 and $34,123, respectively.  The Chevrolet Cruze sits in the No. 3 spot, followed by Honda Civic, Ford Focus and the Volkswagen Jetta.”

Kelley Blue Book not only utilizes their own residual values to calculate vehicle depreciation costs, it also “calculates total ownership costs for new vehicles by applying a sophisticated valuation methodology along with critical financial data from third-party providers.”

The Bottom Line

Picking the right vehicle is all-important to the successful completion of terrible credit auto loans.  The vehicle not only has to meet your requirements, it also must be affordable to own.

We hope the information supplied by Kelley Blue Book helps you in your decision process.

We also want you to know that Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

Even with bad credit it’s very important knowing what to look for when signing the loan documents for a problem credit auto loan.

During the two decades of involvement in bad credit car sales here at Auto Credit Express we’ve seen what can happen if the buyer is not paying attention. This is also one of the reasons we created a website – so that applicants could study issues such as bankruptcy and credit repair as well as today’s topic, signing the purchase contract.

The finance contract

When you sign a purchase contract, you’re agreeing to the terms it contains. In most states there is no “cooling off” period so you won’t be able to change your mind later and bring the car back. This means you need to pay attention to be sure the terms the contract contains are the same as those you agreed to, including:

•    Selling Price – check to see that the price is correct. This figure should include the vehicle’s price plus tax, title and license fees. The dealer may also charge a documentation fee to process the paperwork. These fees should be broken out as to the type and amount for each one.
•    Amount Financed – this is the amount that you will be financing. It should be the selling price of the vehicle less any cash down payment, rebates and/or trade equity.
•    Contract Term – this is the length of the contract in months and should reflect the term you agreed to.
•    Interest Rate – this is the interest rate you’ll be changed. Again, it should match the interest rate you were quoted.
•    Monthly Payment – this is the amount you’ll be required to pay each month during the length of the contract. It should match the figure you agreed to.

If you disagree with anything contained in the finance contract you have the right to walk away before you sign it. If everything is correct and you sign the documents the dealer is required to give you a copy of each one you signed. Before you leave, be sure the dealer has also signed all the required documents.

As we see it

Pay as much attention to the sale and finance documents as you did in negotiating the deal. If you sign anything put in front of you without first checking it and miss something, you’re as much to blame as anyone. Taking a few extra minutes could save you a lot of difficulties later on.

We also want you to know this because at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for horrible credit auto loans.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.

Credit-challenged car shoppers need to be especially careful when choosing a used car for approved auto loans.

We should know because since 1992 we’ve been involved with bad credit car sales here at Auto Credit Express by helping applicants with poor credit find a dealer that can get them financed. A website we developed also allows contains information on topics like credit repair and bankruptcy as well as today’s issue, the importance of picking a used car with an accurate odometer hasn’t been involved in a major accident.

Used cars

For credit-challenged car buyers, a used car is typically a better choice for poor credit car loans since new cars, according to Consumer

Reports, can lose up to 47 percent of their value in the first three years.

But buying used also carries with it a risk that the car you are buying isn’t what the seller states it is. It’s even more of a problem because used cars are not covered by lemon laws and, like new vehicles, there is no cooling off period once you sign on the dotted line.

In some cases, the title that the seller shows you is only “clean” because the vehicle’s previous “branded” title was washed. In other cases, you may actually be signing a branded title without realizing what it really is.

Not only could you be buying a vehicle with hidden damage, you could also be jeopardizing your credit repair efforts.

Experian Automotive study

A recent Experian Automotive credit trends study compared vehicle history to loan performance. Here is what it found:

“…vehicle history can have a major impact on loan performance. The study found that more than 2 percent of the late-model used vehicles (model year 2005 and newer) had a negative vehicle history event (frame damage, salvage, odometer rollback, etc.), which can significantly impact the vehicle’s value.”

The study also found that “while these instances occur across all credit segments, more than 3 percent of financing outside of prime had negative vehicle history” and “Vehicles with a negative history event also referred to as “brand”, also have a higher percentage of chargeoffs for lending institutions.”

What you can do

As a buyer, there are at least three things you can do to avoid buying a car with a negative history.

1.    Go to www.nicb.org and check the vehicle’s history using VINCheck
2.    Order a vehicle history report from either Carfax or AutoCheck.
3.    If the vehicle history report is clean, have it inspected by an ASE Certified Master Mechanic.

As we see it

To successfully complete a bad credit car loan, you need to finance a car that won’t cost you hundreds or even thousands of dollars to keep running. Even if it’s reliable, a vehicle with a branded or washed title could end up costing you money at trade in time (and put off your ability to trade it in sooner).

Auto Credit Express specializes in placing customers with bad car credit with dealers that can offer them their best chance at getting approved auto loans.

So if you’d like us to assist you in getting your auto credit back on track, you can begin now by filling out our online auto loans application.

If you have bad credit and you own your own business you need to understand the problems you might encounter when applying for a problem credit auto loan.

This has been a major issue for us in each of the twenty years we’ve been involved in bad credit car sales here at Auto Credit Express. It was also why we felt it necessary to create a website so applicants could study this issue as well as others such as repossession and tote the note car lots.

Unfortunately, a tote the note dealer is sometimes the only choice for self employed people with bad credit if they don’t report all their income to the IRS.

Income issues

One of the most difficult bad credit car loans to get approved is for people who are self employed.

This is because self employed individuals are responsible for keeping their own records and entering this income on Schedule C of their income tax returns.

If only part of this income is reported, it can reduce the taxes paid, but it can also prevent them from getting a car loan, especially if their FICO scores fall below 640.

Income validation

While regular banks typically don’t require proof of income, this isn’t the case with subprime lenders. Their position is that an applicant’s income must be verified with a professionally prepared tax return. If the correct income amount isn’t listed on a tax return there is no proof even with bank records supporting anything additional.

Bad credit lender rules

Most bad credit lenders require a minimum monthly income. They also use the verifiable income to compute a debt-to-income ratio in order to determine a budget for a car payment. This can affect self employed people in a couple of ways:

•    Bad credit lenders typically require a minimum income of between $1,500 and $1,800 per month. For self employed people this means reporting a minimum yearly net profit (after expenses) of $18,000 to $21,600.

•    Even if net profits meet the above requirements, there is also the chance that monthly expenses are out of proportion to it. For example, say someone reports an income of $2,000 per month. If this individual’s real actual income is $3,500, reasonable monthly expenses could be $1,800. In this case, even though the actual debt to income ratio is acceptable, the difference between reported income and actual expenses would not qualify that person for a bad credit auto loan.

As we see it

If you are both credit-challenged and self employed, you need to consider how underreporting your income would affect qualifying for a loan as well as your debt to income ratio.

If the income on your tax returns is too low or if your monthly debts are not in line with what you say you earn, than you will not qualify for no credit auto loans.

Here at Auto Credit Express we specialize in placing applicants with bad auto credit with dealers that can give them their best chance at getting approved for a bad credit car.

So if you’re ready to take that first step in improving your car credit, you can begin now by filling out our online car loans bad credit application.