As part of the loan process and if you have less than perfect credit one of the extra things you will usually need is a list of references

Our references

If you are someone who is credit-challenged, chances are you’ll need a list of references when applying for a car loan.

Here at Auto Credit Express we know this is usually what these lenders ask for since for the last twenty years we’ve been helping applicants with below-average credit scores. It’s also why our website features a resource section on research topics like free credit scores and bankruptcy as well as today’s subject, one of the typical documentation requirements of bad credit auto loans.

Documentation for loans

In addition to the usual auto loan requirements such as proof of insurance and a valid driver license, high-risk auto lenders typically add additional items they call stipulations (“stips”) for their car loans.

In most cases, one thing they’ll ask for is a list of references.

References

So what is a reference? Fortunately, it’s a lot simpler than it sounds. A reference is simply someone who knows you. This person can be a relative, friend, co-worker, or even your boss.

In most cases, six references will be sufficient. Many lenders will ask for only four, but since there are some that may require more it’s usually a good idea to have at least six available.

Reference information

In addition to the person’s name, you’ll also need to supply their address and phone number (either home or work).

Before putting anyone on your list, be sure to get permission to use their name as well their address and phone number. You should also be aware of, and let them know, that during the verification process they might be contacted by the lender in order to confirm the fact that they know you.

A time saving tip: To save time for both you and the finance manager at the dealership, you’ll want to bring the list with you on your first visit.

The Bottom Line

We have found that it’s a good idea to bring a list of six references – complete with their addresses and phone numbers – when you visit the dealer for the first time. If you follow this practice you’ll find that the application process will move along more quickly and smoothly.

We also have another suggestion: if you have car credit issues, Auto Credit Express can assist you in finding a dealer for your best chance at an auto loan approval.

So if you find yourself in this situation and you’re ready to reestablish your auto credit, you can begin now by filling out our online car loans application.

What to expect with approved auto loans if you have less than perfect credit

The last two decades

Credit-challenged car buyers often don’t know what to expect once they’ve received a loan approval.

We know what they’re facing from because for the last two decades we’ve been helping auto buyers with low FICO scores here at Auto Credit Express. We even designed our website so that these car buyers can research subjects like repossession and today’s topic, understanding the subprime auto loans process.

When you apply

The first thing you’ll notice is that you won’t pick out a car right away.

Once you’re contacted by a dealer that matches your needs, the first thing that will occur is an interview by a finance manager.

Once the interview is complete, your credit application will be submitted to the lender or lenders that fit your credit profile. Even then, you’ll usually wait until the finance manager receives a notification from the lender before you’re shown any vehicles.

This is why:

Budget

Once an application is received from the dealer, the lender checks your income and pay stubs for verification. You may also need to prove your job time, work and income history with W-2 wage statements from prior years.

Any additional sources such as child support or disability also typically need to be validated with court orders, determination letters and possibly even bank statements.

The lender then examines your expenses and computes a payment range you can afford using your monthly debts and factors in such expenses as auto insurance.

Credit tier

Once you’re approved, the lender will then usually place you in a program tier based on your credit scores plus additional factors such as job stability and previous payment history.

The tier you’re placed in dictates such conditions as the interest rate, contract term and down payment requirements.

All this is then transmitted to the dealer in the form of a payment call.

Your choices

Once the dealership receives this information, the finance manager will then determine which cars in inventory meet the requirements of the payment call. For example, with most subprime lender programs, the newer the car and the lower the mileage the longer the loan term allowed. In some cases, newer vehicles will also qualify for lower interest rates.

Vehicle issues

This is usually the point at which problems can occur. Many customers will pick a car based on what they want, say a 5 year old pickup with 70,000 miles. Even if it looks good and drives nicely, the available loan term may be short and the interest rate charged by the lender may also be higher.

In other words, the truck may look nice, but because of its age and mileage, the payment may not fit into the budget set for you by the lender. In this case, it’s time to choose a different vehicle.

The Bottom Line

Once you gain a basic understanding of the loan process, you can avoid some of the problem issues including picking the wrong vehicle.  At the same time it’s good to remember that the goal is to establish your auto credit, not finance your dream vehicle.

Auto Credit Express specializes in placing customers with poor credit scores with those dealers that can give them their best chance at getting 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.

The identification needed when taking delivery of a car financed through a subprime auto lender

How we know

There are specific identification requirements that must be met prior to taking delivery of any vehicle financed with a bad credit lender.

These requirements are very familiar to us because at Auto Credit Express we’ve spent the more than twenty years helping car customers with credit issues. We even designed a dedicated web site that explains all aspects of the loan process including today’s discussion that has to do with the proper identification needed when taking delivery of a vehicle financed by a high-risk lender.

Know the rules

Once you’ve received an auto loan approval, under certain circumstances there are still issues that can bring the loan process to a halt. One of these is the proper identification applicants need to bring with them in order to take delivery of a vehicle.

To avoid either a trip back home or the possibility of being unable to pick up your new car altogether, this is what you should know:

Identification

Prior to actually taking delivery, you’ll need to present a valid photo driver’s license as proof of identification. Even though a copy should’ve been made prior to a test, in some cases (usually because the salesperson is in a hurry), this might have been overlooked.

Even if a copy was made, it could either have been lost or misplaced. In any case, if you get asked and can’t produce a valid driver’s license at this time, the delivery process can quickly get complicated.

The details

When you present you license, someone (usually the salesperson or finance manager) will make and place a copy of it in the deal folder along with the other loan documents.

The driver’s license you present must be current and valid (not expired or suspended) and issued by the state in which you live. The address listed on the license must also match the address that was supplied on the credit application.

In a growing number of states, even if a license appears to be valid, the dealer is required to verify this with the state’s department of motor vehicles (DMV). If the verification results show that it isn’t (due to outstanding tickets, fines, suspensions, etc.), than this situation will also stop the delivery process.

The Bottom Line

When taking delivery, be sure to come in with a current, valid driver’s license – if not, you’ll be unable to pick up your new car.

One more thing: if you have poor credit, we ask that you consider applying for an auto loan at Auto Credit Express, where we’ll forward your application to a dealer that understand less than perfect credit and can offer applicants their 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.

Locating a lender if you have some rough patches in your credit history is not always the easiest thing to do

Our experience

If you’re someone who is credit-challenged you may be wondering why it’s so hard finding a lender on your own.

We can understand the frustration because at Auto Credit Express we’ve been helping consumers in this situation since 1992. We even created a website so car shoppers with less than perfect credit can study such topics as repossession as well as today’s subject, why locating a subprime auto lender on your own is so difficult.

It all comes down to credit scores

For car shoppers with fair to good credit – which usually means a FICO score of at least 640 or more – checking the interest rates online with banks, credit unions and even captive finance companies like Ford Motor Credit is usually the best way to find the lender with the lowest rate.

But if your credit scores fall below 640 or you have a limited credit history and no co-signer with good credit, the issue of finding a lender that is able to approve you can be more difficult.

Subprime auto lenders

Right now there are at least 30 national or regional lenders that cater to higher-risk car loan applicants and their lending requirements can vary widely.

The biggest hurdle for car buyers with poor credit, however, is that nearly all these companies are indirect lenders. To receive a credit decision from one of them, you’ll have to submit an application through one of the franchised new car dealers they are affiliated with (most of these lenders don’t work with independent used car lots).

Searching for a dealer

You can begin your search by calling around to the various new car dealers in your area, but in most cases you’ll be instructed to stop by and fill out an application in person. You may get lucky (remember, this is often a shot in the dark) and receive an approval.  If you don’t, however, it can end up being embarrassing as well as a total waste of your time.

But there is another option.

Thousands of applicants every year find that the easiest and least stressful way to locate one of these dealers that is to go online and submit an auto application through a web site that caters to credit-challenged consumers such as ours that can be found at www.autocreditexpress.com.

There you’ll find a resource section that includes informative videos as well as a number of auto loan calculators that will walk you through both the screening as well as the application process.

It all starts here

That’s because at Auto Credit Express we work with dealers that understand a broad range of credit issues and can offer applicants their 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.

There are some situations where the additional cost of gap insurance might be justified especially if you are trying to establish your auto credit

Backend products

As dealer backend products go (backend products are those things the dealer business manager is in charge of selling), we can think of at least two situations in which at least one of them, gap insurance, might make sense. This is especially true if you have less than perfect credit and, believe it or not, are on a tight budget.

We’ve come to this conclusion here at Auto Credit Express after over twenty years of helping consumers with credit issues find a dealer that can get them approved for a car loan.  Our website is even designed so that applicants can research all aspects of the bad credit auto sales process including today’s topic, the pros and cons of gap insurance.

Understanding gap insurance

Although gap insurance is never a requirement in qualifying for an auto loan and you should never believe anyone who tries to tell you it is there are times when choosing it can be the right decision.

That’s because until the last payment is made, your car really belongs to lender.

While it’s being financed, if you’re involved in an accident with your car other than one involving a total loss, your full coverage car insurance (required by the lender) will pay to repair any damage, less the deductible.

At the same time, if you’re involved in an accident where the car is declared a total loss, the insurance company will typically pay its retail value (possibly less any deductible) at the time of the accident.

The only problem with a total loss accident is that if it occurs any time during the first half of the loan term or even further depending on the size of the down payment, the insurance settlement could be thousands of dollars less that the loan payoff amount.

If this happens, payments must continue until the remaining balance is paid in full.

Admittedly this is a worst case situation but it can and it has happened. This is also where gap insurance coverage pays off.

If you have it, the insurance company will pay the difference between the insurance settlement and the balance owed on the loan (less the deductible – although if you weren’t at fault, in many states your car insurance company will cover this as well).

When gap insurance is needed

Gap insurance doesn’t make sense if:

•    You have a short-term auto loan (36 months or less). In this case you’ll be in an equity situation fairly quickly.

•    Your down payment is 20% or more. There’s a good chance you’ll be in an equity position with most car loans – especially for terms of 60 months or less.

On the other hand, in just about every other situation it usually makes sense to at least consider gap insurance.

As we see it

There are at least two instances where purchasing gap insurance means means avoiding possibility of paying thousands of dollars to a lender for a vehicle that’s damaged beyond repair – a loan term of over 36 months or a loan in which the down payment is less than 20% of the selling price.

At the same time, we want you to know that if you have poor credit Auto Credit Express will forward your information to dealers that understand this 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.

Kelley Blue Book discusses the ownership costs of cars that certainly could work for people with less than perfect credit

What you need to understand

Regardless of your credit situation it’s always a good idea to consider the total cost of a new car over time.

This is even more of a concern if you have poor credit. We understand, since for over two decades here at Auto Credit Express we’ve been helping credit-challenged applicants find a dealer that can get them approved for a car loan. Our website reflects this experience on topics such as credit repair as well as today’s issue, choosing an affordable car once you’ve received a loan approval.

Kelley Blue Book

According to Kelly, “The cost of owning a car over several years can easily exceed the initial purchase price and vary greatly from car to car.”

In compiling this information, Kelley uses “real-world data updated every 60 days,” which makes this information even more accurate for car buyers. The five-year cost figure includes depreciation, fuel, insurance and financing (although this last figure will be more for car buyers with less than perfect credit).

“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 their current top five vehicles, along with their five-year costs of ownership:

Rank    Model                  5 Year Ownership Cost
1    Nissan Versa            $26,186
2    Hyundai Accent        $26,884
3    Toyota Yaris               $27,330
4    Kia Soul                      $28,203
5    Ford Fiesta S             $28,355

“As an analytic powerhouse, Kelley Blue Book would be doing a disservice by not sharing this valuable information,” said Flores. “Because cost of ownership can vary significantly from car to car, car shoppers should be aware of everything their purchase entails before making a final decision on which new vehicle to buy.”

As we see it

Picking the right vehicle is especially important for people with bad credit since, for many of them, a car is the largest purchase they will make. This means the vehicle not only has to meet their transportation requirements, it also must be affordable to own. If you are one of these individuals, we hope this information helps you in the decision process.

You should also know 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.