Carrie Reeder asked:




A recent bankruptcy will not disqualify you from obtaining an auto loan. In fact, opening a new line of credit shortly after a bankruptcy helps re-establish your credit and improve your credit history. Bankruptcy allows a fresh start. Initially, lenders may be hesitant to lend you money. However, after you have established a good payment history with new creditors, other creditors will take notice and become more willing to offer lower interest rates.

Sub Prime Lender Approval

Although a bankruptcy will not prevent you from qualifying for an auto loan, it will make it difficult to obtain a low interest rate. The interest rate plays a huge role in determining your monthly payments. On average, individuals with good or fair credit receive an interest rate of 5 or 6 percent. Individuals who have filed a recent bankruptcy can expect to pay a few points higher. A higher interest rate can increase monthly payments up to $150. Because traditional auto lenders are unwilling to negotiate low rates with recently bankrupt individuals, sub prime lenders are your best alternative.

Improve Credit History

Auto loans after bankruptcy are ideal for rebuilding credit. However, if you do not want to pay a high interest rate on the auto loan, put off obtaining a new car and apply for a new credit card or line of credit. The interest rate received on these types of credit will also be higher. By paying the balance on the new line of credit each month, you will not incur huge finance fees, and your credit report will reflect a good payment history with new creditors. If possible, try and open at least three to four new lines of credit. After you have had the new credit accounts for 12 – 24 months, now is the time to apply for an auto loan. Your credit history and score will have likely improved, thus auto lenders will have confidence in your ability to repay the loan.

Shop Around for the Best Rate

Request quotes from several auto loan brokers. Applying for a quote online is quick and convenient. Submit applicable information such as employment history, income, and desired loan amount. The auto loan lenders will obtain your credit report and negotiate the best rate with various auto lenders.

Alicia

Scott Stanko asked:




When your credit score gets below a certain point you may have to turn to sub prime lenders for your auto financing needs. As you apply for these types of loans you will notice that their interest rates are considerably higher than your traditional lending sources you have used in the past. Although it may feel like it, sub prime lenders do not charge higher rates just because they think you are a bad person, or to punish you for your current financial situation. There are some very real and calculated reasons that the rates are higher on these types of loans.

1) Higher Risk Of Loss- Sub prime lenders have much larger default rates as a percentage than regular prime banks do. When a lender has high default rates they have to charge a higher rate of interest on all their loans to help off set the losses they incur on the defaults. Banks are in the business of making money and charging higher rates allows them to collect more money in interest up front and hopefully remain profitable after the losses they incur. If they were to charge low rates on all their loans and still incurred the same amount of losses they would go out of business because the losses would exceed the income that their loans generate.

2) Higher Collection Costs- When a lender has higher default rates they also incur higher collections expenses. Repossession, legal, title, and staff expenses all increase when you have large amounts of loans that default. All these expenses affect the lenders bottom line.

3) Verifications- Sub prime lenders have very strict guidelines that they have to follow. Before any sub prime lender will disperse funds on a loan they will verify all the information you provide on your application. Staff is needed to contact employers, landlords, mortgage companies, and insurance companies. This can be a long and tedious process that takes time and hourly employees.

As you can see there are some very real expenses that sub prime lenders incur as cost of doing business. The best plan is to make timely payments on this loan and as your credit score starts to rise look to refinance through a prime lender at a lower rate in the future.

Juan

Carrie Reeder asked:




The best car loan rates are out there if you search for them. Based on
your credit past, you may find either a prime or sub prime auto lender
is your best choice. The surest way to find the answer is to request
free online loan quotes to narrow your choices.

The Differences Between Prime and Sub Prime Lenders

Prime and sub prime lenders differ in the types of loans they offer.
Prime lenders offer A loans to those with credit scores of 650 or higher.
Sub prime lenders provide loans to everyone else. Sometimes though,
financing companies offer both types of financing.

Sub prime loans have higher rates and fees since the risk is higher for
lenders. Reasonable lenders will only charge a couple of points higher
for most types of loans.

Who Has The Best Rates?

The only way to find who has the best rates is to do your own
comparison shopping. Depending on your credit score, you may be surprised who
can offer you the most competitive package.

As important as low rates are, fees should also be considered.
Fortunately the government made comparison shopping easy by requiring lenders
to disclose the APR of any loan. The APR includes both closing costs and
rates.

Find The Right Lender

You should start your car loan shopping online, not at the dealership.
There are too many incentives for the salespeople for you to be sure
you are getting the best deal.

Start with a car loan broker site that brings many lenders together.
You can quickly access free quotes from there. Then follow up with other
lenders.

And don’t give permission for a lender to access your credit report
unless you are pretty sure you want to go with their offer. Otherwise, you
will find that multiple credit inquires will lower your score and hurt
your loan application.

While there are no instant solutions to finding the best auto loan
rates, online sites do make it faster. A couple of hours spent securing
your vehicle financing will both save you money and make the car buying
process easier.

Maurice