If you have bad credit and need a car loan but don’t have any money available for a down payment you may be wondering if you’ll qualify for a car loan. First, you need to establish a timeline. Did your car break down today and you need to get to work 50 miles away? Then you need a car pronto. If not, you may have a little time. Even if you have perfect credit, it is a good idea to put as much money down as possible on your car loan. This will end up saving you up to thousands of dollars in interest charges over the life of your loan. Don’t think it’s just a bad credit thing, it’s a smart thing. If you’ve got some time, start figuring out how much you can save by the time you need a car. Are you going to replace a car because it has a ton of miles on it? That’s a good reason, and cars, being mechanical, will inevitably break down eventually.

You should start saving money immediately, save money until you have 20% or more to use as a down payment. If your car breaks down early, don’t fix the car just try to get your car at that point. There is almost never a situation in which you will get your money back out of a car repair upon trade in. Now if you can’t wait to get a car and you don’t have any money to put down, you should try to get a car that is going to work best for the lending programs. Remember, even if you get a good deal on a car you are still adding in your tax, title, license, and fees into the loan. This may not be possible in many cases especially if your credit is really rough. Just ask the finance manager what cars will work with little or no money down and they can get things going in the right direction.

If you have bad credit and are considering getting an auto loan you may have looked at cars that are privately owned sometimes called a “private party auto loan“. New Start Auto Loans will match your application with your nearest auto dealer; Hence, you will need to work with their inventory. The good news here is that dealerships are regulated by the department of transportation and need to have an inspection completed before they are offered for sale.  You are also protected by many laws governing these sales when you get an auto loan for a dealership car.

If you are self-employed you may have concerns about how you can get a car loan. The first thing you need to know is that not every dealership has a program for people that are self-employed or own their own business. You need to find a dealer that has a lender that works with self-employed people and knows what the lenders expect. New Start Auto Loans has many dealers that deal with many different types of financing. To prepare to get an auto loan while self-employed or when you own your own business, you will need to gather up proof of your income. Proving your income might be the most difficult part of your finance process. If you are employed through a business you will likely get a check stub, if you are self-employed, however, you will need to prove your income another way. If you have been self-employed for several years, you will probably just need to show your last two years of tax returns. Hopefully, you haven’t found excessive deductions so that your income is almost nothing.  Keep in mind that banks are going to use your adjusted gross income not your net income. If you had $200,000 in income but wrote off $185,000 you can only prove $15,000 for the year and will only qualify based on that.  If you are reading this, are planning on getting a loan in the future, and are self-employed, please keep in mind that finding extras to write off may reduce your taxes but it may reduce your income so much that you won’t qualify for a car loan.

New Start Auto Loans is here to help match you to a dealer program in your area. We do not offer you a loan directly, we do however take steps to make sure that when you apply, your application gets into the hands of finance managers that have experience in many various types of bad credit auto finance situations. Whether you have bad credit, no credit, are trying to buy a car after or during a bankruptcy or foreclosure rest assured that New Start Auto Loans will match you to a finance manager in your area that can assist you with your auto loan.

If you have bad credit or no credit and are looking for an auto loan you may have found a car dealer that has a special finance program. Once you give the finance manager your information they’ll ask you to bring in some documents.  Is this just to prove you are who you say you are? Banks need those documents for specific reasons and require them to get you financed.  Yes, of course, they need to verify your identity, with new laws in place and identity theft at an all-time high you should be glad that someone is looking out for you rather than getting mad because you have to prove you are who you say you are. So they asked you for your most recent check stub? This is to show the lender how much you can afford. They have a lot of experience in calculation this and may be doing you a favor when they set a maximum payment per month.  Phone bill? Why a phone bill? If the lender needs to get a hold of you they want to make sure the phone number you provided is your phone number.  If you give them someone’s phone number that does not belong to you they can rest assured that if you are late on a payment, they won’t be reaching you. Utility bill? This is to prove you actually live at the address you provided. People have asked, why can’t I just use any piece of mail? Just think about it, how likely are you to set utilities up in YOUR NAME at a house you don’t actually live at? Finally, references, usually a lender will want about three to six references. These references are needed to reach you if you move or change phone numbers. If the bank sends out your next payment book and it comes back because you moved they will need to reach you somehow and so they will call the references.

Bad credit really is a broad term.  Bad credit is a descriptive term that refers to less than perfect credit but bad credit really is in the eye of the beholder.  Credit may be bad to some and okay to others depending on who’s asking.  If you have been extended any type of credit in the past and been unable to pay on the required terms you may have bad credit;  But it’s not that simple.  First of all, there are a thousand and one variables. Your credit history is a compilation of credit that has been extended to you if the form of credit cards, auto loans, home loans, and personal loans over time.  Most of your credit only shows up in your credit file for seven years from when it was reported.  If an institution or creditor does not report to any of the three main credit bureaus it probably won’t show up on your credit at all.  Some derogatory items on your credit that are usually not considered “credit” until they show up because they are very past due and in collections.  These can include utility bills, phone bills, cable bills, hospital bills, and even fines can show up on your credit.  One interesting thing to note is that you may have a dozen hospital bills that show past due, but if you’ve made all of your car payments on time it will be easier to get a car loan. I once talked to a lender who said “I don’t care how they paid their cable bill I just want to know that they are going to make their car payment.”

Here’s another thing to consider. There are three main credit bureaus, TransUnion ™, Equifax ™, and Experian ™. They will all have slightly different information reported on them and sometimes very different scores as you may already know.  Did you know however, that your credit score will vary depending on what type of credit you are applying for?  If you apply for a credit card you may have a 625 TansUnion ™ score but when you apply for an auto loan your TransUnion ™ score is 601. This is because the credit bureau tries to determine how likely you are to pay on the required terms of each different scenario. You may have had a credit card that average payments were $80 a month and paid every payment on time but when it came time to make your $407 a month car payment you were late a few times. The biggest determining factor in determining whether or not you get a loan is not so much your score but your “credit history”.

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A bankruptcy is a legal process to eliminate your obligation to pay some or all of your debts. The two most common types of bankruptcy are chapter seven bankruptcy and chapter thirteen bankruptcy. In a chapter seven bankruptcy, you are being released of your obligation to repay most bills, collections, and judgment completely. In a chapter thirteen bankruptcy, you will be required to repay a large part of your debts, without interest over several years. This is common if you have too many assets to declare chapter seven.

Many people want to get out from underneath many of their bills or collection accounts. Sometimes due to uncontrollable events a person could find themselves with more debt than they can pay back in a reasonable amount of time. Before you declare bankruptcy, there are a few things you should consider.

First, will it be impossible to get your budget under control without bankruptcy? Many times if you just rearrange things you’ll find that with a little sacrifice you can get out of debt in a few years.

Second, are you ready to have a very negative brand on your credit bureau for many years? Once you are out of a bankruptcy you don’t start at the beginning again you start below that, with no positive credit, And with the black mark of a bankruptcy on your credit. 

Next, has the situation that caused you to get into all this debt and bad credit changed? If you are still not making enough or still incurring large bills you can’t handle, get divorced, or any other thing that will make it difficult to get through without picking up some big debt, don’t do it. There aren’t many good reasons to declare bankruptcy now and then end up in the same predicament later with worse credit. 

Finally, are you prepared to change? Many people that declare bankruptcy are in this situation because they were not responsible. Maybe they used a credit card too much, bought things that weren’t in their budget, or maybe they didn’t feel like paying their bills because they wanted to use that money for something else.

You need to be completely ready for a bankruptcy, it’s after effects, and the road ahead if you are going to consider a bankruptcy. Getting into a bankruptcy before you have taken a careful look at the situation will lead you back to the same rut you are in now, maybe even worse.

Gap is the difference between the actual cash value of a vehicle and the balance still owed on your vehicle to the finance company on your loan or lease.  GAP insurance (Guaranteed Auto Protection) covers this difference if a total loss takes place.  There are many scenarios that would call for you to get gap coverage.

Consider this, even if you paid exactly what your insurance company would pay out in the event you crashed your car for the car you purchase, you will also have tax, title, and license fees on top of your loan. Most people have a deductible on their insurance so add on around another $500 dollars. If you have bad credit, that means you will probably not get prime finance rates. This will cause more of your payments to go toward interest decreasing the amount you knock off your loan. This will likely make you have negative equity for a longer period of time.

If you are trading in a vehicle and have negative equity on it you will need gap coverage because you are already putting yourself in a negative equity situation.  You will need to have gap coverage on most auto loans unless you have put between 30% to 40% down on your auto loan.  This will make it less likely that you will have negative equity on your vehicle if it gets totaled.  Picture this, you are leaving for work one sunny morning and look up to see a large tree branch has crashed down on your car causing structural damage.  Not only could this ruin your day but if you have negative equity you will need to continue paying off your totaled car until the loan is done.

Your Insurance company isn’t required to pay off your loan,  they only need to give you what your car is worth, guess who decides what your car is worth?  They do.  Gap coverage can save you a lot of problems down the road when you have an unpleasant incident with your car.