Help With Car Loan

Used Car Buying
Questions From a First Time Car Buyer


Some used car buying questions from Sam in Victorville, CA...
Need help with car loan due to some bad credit issues.


Hello Wise Expert,

Here is a brief outlook on my credit. I'm 20 years old very young and my credit has only been in progress for 2 years.

And recently I have 3 medical accounts that were deleted off of my credit report 3 days ago. I last checked my credit score 2 weeks ago and it said I had a credit score of 550.

I have been searching for a reliable car in between 11,000 to 16,000, but need help with car loan, because I've got some bad credit issues.

I have gone to car dealerships, mom and pop car lots, the infamous "we'll approve any credit" car lots and have come up with nothing but auto loan rejections.

I don't have a co-signer with good credit. And the only reliable source would be my brother who has a credit score of 618-622.

We actually found a 2008 Honda Civic for $16,388.00 at a dealership and they basically said "We're approved and everything was good," so it seemed, but then in order for me to drive the car home I also had to pay a $211.00 insurance binder.

8 days later they called to tell us they cannot find any bank that will approve us. And that we have to return the car. =( Bummer.

Now, my used car buying questions are...

1. How do I get approved for an auto loan?

2. Am I able to get my $211 back?

3. Would there be anyone who would approve my brother?

Thanks ahead of time for your help with my car loan.


Answer:

Hi Sam,

I'll answer question 2 first and say that I would think you should at least be able to get a prorated refund and only be charged for 8 days worth of use, but you may be entitled to a full refund...Contact the insurance company for this and it should be fairly easy.

Worst case, demand that the dealer eat the premium, because they delivered the car without an approval!

Help with car loan
Second, it sounds like you were a victim of a spot delivery scam and, in my opinion, the car dealer never should have delivered the car had they not had an approval up front.

With regards to your bad credit issues and getting approved for a loan, there are a lot of things that I don't know that are going to be important for lenders in order to give you and/or your brother an approval.

For instance,

  • Credit depth (past history and current accounts)
  • Job history
  • Monthly income
  • Down payment
  • If those collections on your file have been completely removed from your bureau and are not just showing as paid
  • Why your brothers score is so low.

Even without knowing these things, I think I can help to point you in the right direction. I am guessing that if the "we'll approve any credit" car lots are saying no that you have little to no money down. So my first suggestion would be to save up a minimum of $1000 to use towards a down payment, but the more the better.

Your 550 credit score doesn't help matters with traditional lenders, but with the dealers you mentioned above all they care about (for the most part) is cash down.

Most first time car buyer programs
Most lenders are only going to loan $8,000 to $12,000 to a first time car buyer and that $12,000 number is usually only with customers that have other credit (credit cards, a home loan, etc), or a real strong cosigner, so I'd say that the $8,000 range is more common.

That being said, my second suggestion would be to look for less car and just keep in mind you're buying it to just get the credit ball rolling and will probably only need to own for 18 months to do so.

Some suggestions
As for who will approve you or your brother, there are lots of banks, but down payment helps to give you more options as to what vehicle you can buy.

Since I'm a little limited in the information I have it's probably in your best interest to save up some cash and keep up on your credit (you can get your Free Credit Score from CreditReport.com). Read Collection Removed for more info on cleaning up negative items.

Quick note...If you don't have the option of waiting to save or further fix credit issues, then you'll sort of be at the mercy of the dealer and will probably be very limited in the type of vehicle that you'll be able to buy...

They can then work to get you an approval and structure a loan that will work on a vehicle that fits for the bank and you. It's sometimes difficult as a first time car buyer to be able to pick the car you get to buy.

Where to find help with your car loan
You can find local car dealers that specialize in helping people - with bad credit issues - to get approved for car loans here: Bad Credit Auto Loans - Auto Credit Express�. They have a huge nationwide network of dealers with lenders that can help you.

What I do...
When I work with customers that need help with a car loan, I will oftentimes have to get the approval up front and then give the customer options as to what vehicle they can buy based on the approval. Unfortunately, it's not always what the customer wants, but it helps them to get their credit established, so they don't have to jump through the same hoops next time they buy.

Otherwise, if the customer has a specific vehicle that they "have" to have, then I'll get them approved and tell them how much down payment they will need to get the loan in line with the bank approval.

Hope this helped to clear up some of your used car buying questions, but if you need more help with your car loan and getting your bad credit issues resolved, then please don't hesitate to contact me again...Justin


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