Tuesday, May 6, 2008

Bad Credit Auto Loans: No Break Just Accelerate

Bad credit auto loans are designed for those who fail to qualify for financing with traditional lending institutions such as credit unions, financial institutions, and banks due to their below the mark credit scores, previous vehicle repossession, recent bankruptcy, low income, or inability of producing specified down payment. Often, the automobile dealers fund bad credit auto loans initially, which are then either sold or assigned to the particular car company.

Obtaining a bad credit auto loan is fairly simple unlike the regular auto loans that require borrowers to have strong credit records for eligibility. To apply for bad credit auto loans, all you need to do is produce necessary documents to prove a regular monthly income of minimum $1,500 from a fixed income source, citizenship of Canada or the US, and ability to obtain an automobile insurance on your own. In some cases, bad credit auto loan lenders may however ask borrowers proofs of their working phone number or residence proof in the form of utility bills or credit card bills.

It is indeed simple to obtain a bad credit auto loan. You must not take the process of obtaining one easily. It is advised that you do some solid research before approaching a loan agent for availing such a facility. This will ensure that your purchase is planned and there is no scope for any default.

First and foremost, before making up your mind on buying a vehicle, you must review your credit report. The credit bureaus maintain credit records of millions of people like you and give green signal to the registered lending companies to lend you, depending on the quality of your credit report. You can request a copy of your credit record annually from any one of three credit bureaus. A careful study of such a report will tell you whether all your bank accounts are in order and your debt position has room for a fresh one. In case you have suffered a bankruptcy in the recent past, then it is advisable that you close all your open accounts by resorting to a debt consolidation loan, to avoid further cracks in your credit record.

Also, after you have carefully studied your credit report if you find any loopholes in it, immediately report to the credit bureau. In case you have defaulted due to a bankruptcy, attach a sheet to the credit report, explaining what circumstances led to this mishap and then send the copy to the credit bureau. If lenders sympathize with your situation and feel that a default, in your case, was just inevitable then they might revisit their decision of lending to you. If you are fortunate, you may get a better product and at better rates, then what you would have otherwise obtained being in a high risk category.

Studying your credit report thoroughly will also allow you to gauge your current financial health. Accordingly, you can determine whether you can afford another debt "bad credit auto loan" in your books and whether you would be able to repay it timely. Carefully decide what bad credit auto loan amount can you afford and check the loan tenor. After determining your affordability, shortlist the products that are within a reach and choose a dealer based on a thoughtful comparative analysis.