Past Collections Are Making it Hard to Get a Car Loan

by Lorrin
(Evansville, IN)

Question: I applied for a car loan in December and it got rejected because of bad credit and having medical bills in collections. Since then I have paid off the collection accounts and managed to come up with $4000 for a down payment.

I am wondering if I will be able to get approved for a loan on a vehicle now. My biggest concern is that although I have paid off all accounts in collections, they have not reported it on my credit report.

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Answer: Hi Lorrin,

I would think that if you try to apply on your own again at this point, that you will probably get the same result.

Having $4000 down definitely helps your situation quite a bit, but it sounds to me like you will need a dealership that specializes in bad credit to put this together for you.

Most nonprime and subprime lenders do not lend direct to the customer, but will lend through the dealership to the customer.

They do this, because there are things involving loan structure and supporting documents (i.e. paystubs, proof of residence, etc.) needed to make the loan work. It's much easier for the lender to have "professionals" (car dealerships) do this for them rather than the customer themselves.

I don't know all the details about your credit that I would need to say for sure what the outcome would be for sure, but a dealer will definitely be your best bet as they will have access to multiple lenders and will know which one would work best for you.

In addition, paying those collections was certainly the right thing to do and will help you down the road, but it sounds like right now you'd need to start building some positive credit as well.

Just a heads up...Your loan terms may not be the best this time around (high rate, short term, etc.), but if you pay well on this loan, then things should get better for you the next time around.

Again, your larger than average down payment will really help you to not only get approved, but may also help to get you a bit better terms.

Hope this helps,

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