A Step-By-Step Tutorial: How to buy a car with bad credit without it turning into a nightmare.
Are you tired of hearing the word 'No' when it comes to a car loan? I set up auto bad credit financing loan specifically so that you could hear the words 'yes'. Who am I, you ask?
I spent 14 years in the automobile business as a Finance Manager so I believe it's fair to say that I know a thing or two about getting a loan financed, irregardless of your past credit history.
Remember, regardless of your past credit history, you still need a car, want a car and most of all, you deserve a car. You should also be treated with respect and given choices. I'm going to teach you how to have a choice with auto bad credit financing loan.
I know what you're thinking here: this lady has lost her mind! But, I know a few insider tips about Ford Motor Credit and some other big name lenders that may help you here. First of all, all lenders now purchase deals based on what is called a beacon score, which is the same as your credit score. There are three credit bureaus that make up the package. Each lender will choose whichever credit bureau(s) they prefer when looking at your credit or a combination of bureaus.
I highly advise everyone to have all three credit bureaus pulled when checking your credit and to pay for the credit score. If you only look at one bureau, you're only seeing part of the whole picture. Bad credit financing is an art and there is a skill to it.
If your credit score happens to be around 600 or higher, Ford Motor will look at your deal with the intention of purchasing it; there are a few exceptions. They are as follows:
1- You cannot have had a previous Ford Motor repossession-
2- If you have had a repo, it needs to be a year or older; if you have had 2 repo's, forget it and move onto another lender.
3- You can be freshly discharged from a bankruptcy, have a high enough beacon score and qualify for a loan with Ford Motor. You just can't have any negative credit after the bankruptcy was discharged.
With the exception of these three things, beacon score will play a large part in your approval. Staying within your financial means is another, so be realistic. If you make $2500 per month and have $1200 going out, don't walk in all high-and-mighty and tell the Finance Manager that you will only have an Expedition or nothing. You'll end up with nothing.
In order to effectively use auto bad credit financing, you are going to have to know what your credit looks like and what your credit score actually is. Otherwise, you are working in the dark.
Pay for the credit score or it's just almost useless. With the credit score, you will know whether or not you qualify for a lender such as Ford. Also, the higher the score, the lower the interest rate. Got it? With an auto bad credit loan, the higher the beacon score, the better.
Let me explain websites like cars.com and the such: They collect applications for car loans online. They then have a network of dealerships that PAY them for the leads. These are generally dealerships that have departments that specialize in getting you financed, regardless of your credit. These departments pay for these leads, so most take them very seriously, as they are their bread-and-butter, so to speak.
If you have a lower than usual credit score, a current repo or just plain, all-around bad credit, this might be the way to go. If your credit is really that bad, remember that you are going to need some cash or a paid-for trade in thatís actually worth something.
O.K., now for the step-by-step system that I promised. First, take control of your car deal! You need to be in the driverís seat, if at all possible. Go online and run a copy of a tri-merge, which is all three credit bureaus, plus pay for your credit score. You can get a FREE copy of your credit report once per year HERE:
This is the new Federal law that actually entitles you to receive a FREE copy of your credit bureau once per year and with some other exceptions. This is not a credit monitoring site. You have to run each bureau separately; Experian, Equifax and TransUnion. Then, you have to pay for the credit score.
So as to hold down on confusion, hereís the scoop: Each credit score for each separate bureau will be different. Thatís why a Tri-Merge is called what it is called. You can run a specific bureau called a Tri-Merge from one company (there are many-just do a Google search) and you actually get one bureau (itís actually all three combined but the credit score is also one credit score). Itís more expensive and generally runs around $34.00 but it just depends on your preference.
Now, with your credit score in hand and a copy(s) of your credit bureau, look at your credit. Do you have anything strange on there that is not yours? If so, itís time to fix it. You should review your credit bureau at least every 6 months to a year. Plus, if your identity has been stolen, you will know quickly. P.S. you can also have a liner placed on the bottom of your bureau that simply states ďDo not extend any credit on my behalf without contacting me first. Work # (111)222-3333 Home#(222)333-4444 Cell# (333)444-5555.Ē Call or write the credit bureaus and request that this is done. You can now do this online for free. Again, do a Google search for all three bureaus listed above.
How do you fix your credit, you ask? I give away a totally FREE book that I wrote on the subject simply for the asking. Email me with Free Credit Repair Book in the headline and Iíll email it to you.
Next in line: Know what you want to buy BEFORE you even go out shopping! Let me make this very clear. Car dealerís jobs are to sell you a car on your very first visit. A salesman/woman and their sales manager believe that if you walk into their dealership and do not leave with a car, you will never come back again. They are going to hammer on you until they either A) Make you mad and you get up and leave or B) Sell you a car. Itís the nature of the beast. Accept it ahead of time.
What do you want to buy? Where can you get unbiased information on the auto? Again, Google for Kelley Blue Book or NADA and you can get cost, warranty repairs, recalls, and information on problems and tons of info beforehand. Limit your shopping to three models. Keep it simple. Those will be the ones that you will shop for.
Can you afford the car? You may think you can afford the car, but the bank may think otherwise! I have seen this so many times in my career. Automobile economics 101: Take your gross income (what you make per year BEFORE Uncle Sam taxes you) and remember, this income needs to be provable-tax returns, check stubs with taxes taken out or a W-2. If you are self-employed, you will need two years of tax returns with Schedule Cís. This is the income that you actually paid taxes on. Being self-employed can be tough. You may need to combine a spouseís income if you are self-employed.
Now with your gross income figured out, find out what all of your debts are that are going out each month. Include everythingÖitís listed on your credit bureauís. Example: Car note=$450.00 + House note= $560.00 + Credit card debt= $425.00
Boat note= $310.00 Charge-offs=$1200.00 (yes, charge-offs; these are bills that you never paid and they were written off). Add all of your debts up. With just your obvious debts (including the charge-offs), you have $1805.00 per month going out. I arrived at that figure by adding up all the monthly notes and taking 5% of the charge-offs. 5% of $1200.00 = $60.00. Weíre not through, though. Now we have to figure in cost of living-utilities. Each lender has their own algorithm for utilities but a good range to estimate would be to add $300.00. Now we have a total outgo of $2105.00. This is what you have to have to pay your current bills before you take on any other debt.
Almost all lenders will not allow your new car note to exceed 20% of your current income. For our example, letís assume that your gross income is $5300.00 per month. Letís take $5300.00 and subtract your debts, which are $2105.00. That leaves you with $3195.00. To make it easy, take $2105.00 and double it. That would be $4210.00. That would leave you with disposable income of $1090.00. What the lender is looking at here is referred to as debt-to-income. They want to know if you have more going out than you can handle. This is strictly a case of numbers and provable numbers. If your gross income was $4500.00 and you had $2105.00 in debts each month, you need to be prepared for one of two things; add your spouseís income and your spouse to the deal or trade in the other auto. If your debt-to-income is running too close to 50%, youíre going to have a hard time getting a loan for anything. Make sense? The way the bank looks at it is this: you canít afford both cars so they assume that you are going to let the other (older) car go back to the lender-repossession. Thatís their take. Debt-to-income is a HUGE deal.
In this case, your disposable leftover income is $1090.00. 20% of that would be $1060.00. Whoa! Let me be the first to inform you that you are NOT getting a car payment of $1060.00! Why? Well, you only have $1090.00 left over for starters. Letís be realistic here. Most lenders will slice that in half which will equal $530.00. Your payment call should be around that figure, give or take a few dollars.
How expensive of a car can I buy on a $530.00 payment? Good question and one that you absolutely need to know so that you can pick out the correct car. One answer depends on the term of the loan. You can finance for 36, 48, 60 or 72 months, as a for-instance. That equates to 3 years, 4 years, 5 years and 6 years. I will tell you this: the worst thing you can do is extend the note out the longest amount of time in order to get the payment where you can afford it. That creates a syndrome that now affects over 75% of car owners called being ďUpside Down.Ē It means that you owe more on your car than itís worth. It also means that you need more money down when you go to trade it in. The only way around that is a lot of money down or a short-term loan.
You can again do a Google search for a Ďcar loan calculatorí. You will punch in the loan amount you want to borrow, the term (48,60, etc.) and the interest rate. If you have not gotten approved already and know the rate, you will have to guesstimate. Hereís a rule of thumb for you-itís not an exact science without knowing your credit, but it is a guide you can follow to get you close. Letís base the rate on your beacon score: thatís what most of the lenders are going to look at. If your beacon (credit score) is in the 400 or lower range, you will need to figure your interest rate on a new car at 21% (state maximums differ-it could be 18%). If you are looking at a used car, figure on 33%. If your beacon score is in the low 500 range, figure your new car loan as you would for the above-mentioned 400 beacon. If your beacon score is in the mid to high 500-range, figure a new car at 18% and a used car at 27%. If you have a beacon of 600 to 649, figure a new car at 16% and a used car at 20%. If you have a beacon score of 650 to 699, figure a new car rate at 12% and a used car rate at 16%. I may be hitting too high on a few of these, but I live in a state that has the highest rates in the nation. Better safe than sorry.
Get Pre-Approved BEFORE you start shopping. This is the easy part, in a way. Remember I told you at the beginning of this article to take charge of your car deal instead of letting the dealer lead you by the hand. It all boils down to financing. If you can walk in with a check in your hand, you are in control. I will recommend a few companies that are reputable, have a proven track record in sub prime loans and all mail the check to you at home. You then go into a dealership and pick out your vehicle, negotiate and buy like a cash buyer! These companies are Household Finance, Capital One Finance, Americredit and E-Loan. You can do a Google search for all four, apply online, and get either an instant approval or one really quickly. When you are approved, they mail the contract to you and then the check. Itís that easy.
On the final decision for the car-work smart here. There is nothing more valuable than time and nothing more rewarding than piece of mind. Please donít go running from dealership to dealership. Wrong. Pick out the 3 models of auto that you can afford. If you are looking for a program car (rental), call dealerships and inquire as to whether or not they have any. If you want a new, ask other people that are driving that model where they bought theirs and would they purchase there again. If you start hearing a lot of ďIíll never buy from them againĒ, move on. Something is wrong. Your new car is only as good as the service you will get AFTER the sale.
Negotiating-Most people hate this. I have only met 2 people in 14 years that enjoyed it; they were both retired and had nothing better to do. One did it for the fun of it and never even bought if you agreed to his price. Donít waste other peopleís time. If you donít like the car, donít negotiate on it. When you do find a car that you would own, tell the salesman youíd buy it right then if the price was right and if they provided you with a Car Fax. The keyword here is: ĎIf the price is rightí. How do you know what a good price is? WellÖglad you asked. If itís a new car, Kelley Blue Book will have dealer cost. Go to: http://www.kbb.com
If itís a used car, compare used car figures at http://www.kbb.com
Whatís the difference? Most dealers (with the exception of the West coast) will use NADA as their guide.
Before you ever drove the car, you went by the dealership on Sunday, when there are no salespeople and you got the Vin# of the car and the equipment, year model and had a good look at it. You already know if you like the car when you drive it, that you would buy it. The list price is in your pre-approved check category, to boot. Youíve already gone online and gotten wholesale, trade-in and retail values for the car.
Retail is what the dealer should ask for the car. This will help you to know whether or not the salesman is trying to add money to the car, or if the dealership is. Trade-in is a figure to gauge approximately what the dealership traded for the car for. It will give you an idea of what the dealer paid for the car, before reconditioning fees and any ticket from service. Now, not every make of car will bring trade-in value. Two that will at this time are a Honda and a Toyota. Those cars will bring trade-in value. Domestic cars generally will not bring trade-in value, with the exception of new, hot models. Other models will only bring wholesale. As an example, Kia makes a great car, but most will not bring close to trade-in value. Mitsubishi is going through changes and also wonít bring close to trade-in value. There are exceptions to the rule: Katrina and Rita-two hurricanes that created a short supply of used cars. If you live in the south, that will be the case for a while. With the exception of a Honda and a Toyota, you can probably be safe offering less than trade-in. Not thousands, mind you, but less. Take into consideration the other costs of trading for a car. Also, ask the salesperson how long theyíve had the car. If the salesperson slips up and tells you theyíve had it a while, your negotiating should be easier. The reason behind that is that the dealer is paying interest on the car every month it does not sell. The book value is also dropping every month so it needs to go.
Throughout the car deal, make sure they know you are paying cash. Donít mention that you have a check from Americredit or whoever. Thatís none of their business. When you make a deal, insist on the Used Car Manager running a Car Fax before you sign any paperwork. A Car Fax will show if the vehicle has been involved in a serious wreck, was bought back from the original customer or is salvaged. This will put your mind at ease. If you donít like the Car Fax, donít buy the car.
Throughout your shopping, I canít stress this enough-Do NOT fill out credit applications at each dealership. Every time you sign a credit application, the dealer pulls your credit report and your beacon score goes DOWN. Thatís why I advise on getting approved ahead of time. There are numerous advantages to getting approved ahead of time. The main advantage is that you are in control, not the dealership. Thatís worth a fortune in itself. Their job is to take control of you from the start of every meeting. Believe me; I know what Iím telling you. I lived that life for a long time.
For some reason, should you not be able to get pre-approved because your credit is extremely bad (a discharged bankruptcy is an instant-approval, by the way), and you have to go through an online clearinghouse like cars.com, donít despair. Continue to follow my previous steps and advice and negotiate and insist on a Car Fax report.
When you do decide on a car and go into the Finance Office to sign the papers, I would like for everyone to know that you do not have to purchase any products in order to get the loan. If anyone in Finance tells you that you have to purchase a warranty and credit life to get the loan, which is a bold-faced lie. Why would a Finance Manager do that? Because they work on commission, also. Surprised? Donít be. Thatís the way dealers set up Finance Offices from the start when they realized how much money could be made. The Finance Manager makes money off of the rate they quote you, the warranty they sell you, the gap insurance and the credit life and disability you buy. Thatís how they make a living.
Iím not saying that any of these products are bad, though. I believe in extended warranties. Iím just telling you to shop around first. If you find a cheap warranty, check out the company and make sure they will give the dealer a credit card over the phone immediately when in need of repairs in any state. All in all, I will say this-A manufacturers warranty is always better than an after-market warranty. Always. Just negotiate on it if you want it. The only reason why you would not want gap insurance would be if you literally paid cash for the car. Otherwise, gap is cheap (should retail around $495) and will pay the portion that insurance wonít pay if itís totaled. Just remember what I said about the book dropping on a car every month. It will never be worth what you owe unless you put down a lot of money at the time of purchase.
Credit life and Disability insurance are a personal matter. If you have a life insurance policy, it can be used to pay off the car in the event of your death. If you are single, why do you need Credit Life? The only benefit would be if you are married with a family, it cuts down the payout time. In this situation, your spouse would not lose the car. Disability Insurance pays out for a specified amount of time. It will not pay out for the entirety of the loan. It also has a specified start date from the time you are disabled. It doesnít just kick in immediately.
This is a lengthy article, but the gist of it is this: do your homework at home first. Then get approved online. Then shop on Sunday. Then go get your car and negotiate on everything. It will be the easiest car-buying experience you have ever had. Regardless of your credit situation, if you follow my steps, youíll have a car in no time and youíll be an educated and informed customer during the process. Good luck!
Airline Credit Card Offers - Be Selective When Choosing
Airline credit cards are increasingly becoming popular. Airline companies and banks, in particular, often sponsor airline credit cards in order to provide incentives to attract consumer interest. But before choosing an airline credit card, you should collect as much information as possible about each airline card that you are considering.
If you are a business traveler or a frequent flyer, an airline credit card is definitely something to investigate. But you might be wondering how airline credit cards work. Quite simply, you earn reward points, or miles, for every dollar spent with the credit card. These points can earn you free flights, free companion tickets, lost baggage protection, first class upgrades, car rentals, free stays in hotels and more.
It was the Citi Aadvantage card that first offered the airline credit card. Consumers got points with every purchase they made. These points could be redeemed for free air travel through a variety of different airlines. Today,most airlines have partnerships with credit card companies in order to provide airline credit cards rewards programs, and the incentives offered by these companies is attractive thanks in part to the existing competition in this industry.
When compared to standard credit cards, airline credit cards charge a higher interest rate and, in many cases, also charge annual fees for membership. But when used effectively, there are several attractive features of airline credit cards that help to offset those added charges and fees.
There are two general types of airline credit cards:
1) Airline-Sponsored Credit Cards
2) Bank-Sponsored Credit Cards
The points you earn from airline-sponsored credit cards can be used only on a particular airline. These cards are convenient, if you wish to fly on a particular airline or that airline dominates the routes to your potential destinations. Otherwise, it might be better to go with the many bank-sponsored airline credit cards now available.
Bank-sponsored credit cards are more flexible in nature. Unlike airline-sponsored credit cards that generally only allow you to redeem your points on one airline, you can use your points earned from the various bank-sponsored airline credit cards to redeem your miles on a wider selection of airlines. And typically, the points required to earn free travel is generally less with bank-sponsored credit cards. But there are exceptions to this rule.
Things to Keep in Mind
You should make it a point to thoroughly understand airline credit cards and how they work for you as well as how they work for the card companies before making a decision. You might want to peak with people who already have one like family or friends and solicit their feedback on the cards that they use. You can also utilize the Internet, which offers an unprecedented amount of information on a wide variety of credit cards and their features and benefits.
First of all, when selecting any credit card, you should start first with the applicable interest rate of each card. Is the interest rate comparable to other card offers currently available or does it appear to be abnormally high? If you plan to carry a balance on your credit card, you need to be absolutely sure that you select an airline credit card with the lowest ongoing interest rate available. In general, airline cards are not the right choice for those who carry a balance on their credit cards because of the generally higher costs associated with airline cards. Higher interest rates combined with high card balances never go hand in hand.
Some airline credit cards offer points but only on certain purchases. Keep these reward schemes in mind while choosing a card because the card will be essentially worthless if you are not able to make the type of purchases allowed on the card.
Another important item to consider is the expiration date on points that you earn. Also, find out if your points can be used even after the redemption period has expired. Certain cards will stipulate specific uses for point redemption at certain retailers after the expiration date.
And finally, the number of reward points earned per dollar spent varies from card to card. The number of points necessary to earn free or reduced travel will vary from card to card as well, so make sure to carefully weigh those factors when selecting an airline credit card as well.