Auto loans for not-so-great credit?
September 2, 2013 9:10 AM Subscribe
Several years ago, I went through a foreclosure, but now I'm 100% debt-free and making great money. Who offers auto loans to someone with a credit score in the low 600s?
Credit unions. Low 600s is not bad and dealers will finance an auto loan for you too. Don't settle for the first offer, it may have a high-ish interest rate, so shop around. Also you can refinance an auto loan, so make a few payments and then look at all your local bank/CU websites to see who's got an auto refi special going on.
posted by headnsouth at 9:19 AM on September 2, 2013
posted by headnsouth at 9:19 AM on September 2, 2013
Best answer: Credit Unions are a good bet. Also Give CapitalOne a try.
I didn't have a foreclosure, but had terrible credit for years as aftermath of divorce. I worked for over a year cleaning up my credit report and paying all past debts. My credit score was in the low 600s. After getting turned down from 3 different places (and one "approval" at a ridiculous rate) I applied through Capital One and was instantly approved. The rate was decent. They give you a "blank check" good for up to your approved amount. You just make out the check to the dealer.
You'll be approved (or not) within minutes. If approved you are under no obligation to use their check. If you find a better deal, just destroy their check.
Caveats: they had approved me for a minimal credit card about a year earlier. Also you must buy from a dealer on their approved list.
posted by The Deej at 9:28 AM on September 2, 2013
I didn't have a foreclosure, but had terrible credit for years as aftermath of divorce. I worked for over a year cleaning up my credit report and paying all past debts. My credit score was in the low 600s. After getting turned down from 3 different places (and one "approval" at a ridiculous rate) I applied through Capital One and was instantly approved. The rate was decent. They give you a "blank check" good for up to your approved amount. You just make out the check to the dealer.
You'll be approved (or not) within minutes. If approved you are under no obligation to use their check. If you find a better deal, just destroy their check.
Caveats: they had approved me for a minimal credit card about a year earlier. Also you must buy from a dealer on their approved list.
posted by The Deej at 9:28 AM on September 2, 2013
I think pretty much any car sales outlet (new or used) can set up loans for pretty much anyone, even with dismal credit. At least, that's "my friend's" experience. Find the car you want, decide the payments you think right, then talk to the dealer. They're the most motivated to find you a loan, though of course you can probably get a better deal from a credit union.
posted by anadem at 9:31 AM on September 2, 2013
posted by anadem at 9:31 AM on September 2, 2013
anadem: "I think pretty much any car sales outlet (new or used) can set up loans for pretty much anyone, even with dismal credit. At least, that's "my friend's" experience. Find the car you want, decide the payments you think right, then talk to the dealer. They're the most motivated to find you a loan, though of course you can probably get a better deal from a credit union."
Oh god, please do not back yourself in to a planned monthly amount with a dealership - this gives the dealer way too much control over the transaction. Keep the negotiation of the price of a vehicle totally separate. You should be walking in to that dealership with a great grasp of what your payments will be based on your prior research and pre-approvals and focussed solely on getting the best price for the prospective vehicle.
Places to source loans from - credit unions, large retail banks/financing companies. Just about everyone will do the blank check, pre-negotiated rate deal with consumers these days. Even for folks with middling credit. Get multiple offers, go with the best one. Then go to a dealership (or even better negotiate over email with the internet sales managers) and negotiate the purchase price of the vehicle and just the purchase price. Don't even put the financing terms on the table at all.
Once you have secured the best price possible for the vehicle you should offer to let the dealership beat your financing terms you've walked in with. If they can't, no loss to you and if they can you walk out with better financing terms.
posted by iamabot at 10:07 AM on September 2, 2013 [1 favorite]
Oh god, please do not back yourself in to a planned monthly amount with a dealership - this gives the dealer way too much control over the transaction. Keep the negotiation of the price of a vehicle totally separate. You should be walking in to that dealership with a great grasp of what your payments will be based on your prior research and pre-approvals and focussed solely on getting the best price for the prospective vehicle.
Places to source loans from - credit unions, large retail banks/financing companies. Just about everyone will do the blank check, pre-negotiated rate deal with consumers these days. Even for folks with middling credit. Get multiple offers, go with the best one. Then go to a dealership (or even better negotiate over email with the internet sales managers) and negotiate the purchase price of the vehicle and just the purchase price. Don't even put the financing terms on the table at all.
Once you have secured the best price possible for the vehicle you should offer to let the dealership beat your financing terms you've walked in with. If they can't, no loss to you and if they can you walk out with better financing terms.
posted by iamabot at 10:07 AM on September 2, 2013 [1 favorite]
If you can put off car ownership for a year-18mo and rebuild good credit with a low-limit high-interest card that you never, ever use, and pay off in full every month on time, you will get less ruinous interest rates on a loan and in general have more options.
posted by elizardbits at 10:41 AM on September 2, 2013 [1 favorite]
posted by elizardbits at 10:41 AM on September 2, 2013 [1 favorite]
Have you thought of just saving up and purchasing a new car outright? It might be a shorter-term solution than trying to rebuild your credit, depending on what you mean by "making great money."
posted by something something at 10:44 AM on September 2, 2013 [1 favorite]
posted by something something at 10:44 AM on September 2, 2013 [1 favorite]
1) Get your free annual credit report now. Federal Trade Commission Link. (You can also get one for free if you are denied by a creditor, however it will ding your credit slightly by getting a hard pull for your credit from a creditor.)
2) Check all debts, and make sure they are accurate. This is what the creditors (banks, credit unions) will most likely look at, along with your income, to determine your credit worthiness. My credit union didn't seem to care about our credit scores, only our debts versus income.
3) If debts are still showing, call the creditor and get confirmation that they have been paid. The bank will usually require an official letterhead. (We had good luck getting paperwork from creditors with a Fax to Email service from MaxEmail (free for 30 days too.) I highly suggest getting the paperwork, because sometimes it takes a long time for creditors to report to credit agencies. We had mis-information on our credit reports from the end of May when the debts had been changed at the start of April.
4) Get an account with Credit Karma. It's free. It shows your estimated credit score and you can calculate how debts may change your credit score. You can also see your credit report card. It has great tools and lots of credit advice.
5) If all your ducks are in a row, then apply to credit unions first, then banks, etc. If those don't go through, then I too would suggest Capital One loans.
PS: I stole most of this advice from my dad The Deej, since he helped me with our car loan situation, and this is what I will do for our next try at a car loan. But now I get to tell you like it was all my idea.
Full disclosure: We were not approved. My credit score is Fair - 670 ish - because I carry I high credit usage. My husband's is Poor - below 600 - because he defaulted on loans and credit cards in the past. However my credit union denied us because we had some things in collections, so our debt to income was too high for them. They never even mentioned the credit scores. Our second credit union wanted a year of on-time payments. (My husband missed a payment somewhere.) But again, the second credit union made no mention of our credit scores. We paid off one debt, and will try again later after paying the second. But the tools above really helped us. We got our credit reports, Credit Karma accounts, etc.
Apologies if you already did some of these steps, since you know your credit score already, but it's a good thing to keep on top of.
posted by Crystalinne at 11:09 AM on September 2, 2013 [4 favorites]
2) Check all debts, and make sure they are accurate. This is what the creditors (banks, credit unions) will most likely look at, along with your income, to determine your credit worthiness. My credit union didn't seem to care about our credit scores, only our debts versus income.
3) If debts are still showing, call the creditor and get confirmation that they have been paid. The bank will usually require an official letterhead. (We had good luck getting paperwork from creditors with a Fax to Email service from MaxEmail (free for 30 days too.) I highly suggest getting the paperwork, because sometimes it takes a long time for creditors to report to credit agencies. We had mis-information on our credit reports from the end of May when the debts had been changed at the start of April.
4) Get an account with Credit Karma. It's free. It shows your estimated credit score and you can calculate how debts may change your credit score. You can also see your credit report card. It has great tools and lots of credit advice.
5) If all your ducks are in a row, then apply to credit unions first, then banks, etc. If those don't go through, then I too would suggest Capital One loans.
PS: I stole most of this advice from my dad The Deej, since he helped me with our car loan situation, and this is what I will do for our next try at a car loan. But now I get to tell you like it was all my idea.
Full disclosure: We were not approved. My credit score is Fair - 670 ish - because I carry I high credit usage. My husband's is Poor - below 600 - because he defaulted on loans and credit cards in the past. However my credit union denied us because we had some things in collections, so our debt to income was too high for them. They never even mentioned the credit scores. Our second credit union wanted a year of on-time payments. (My husband missed a payment somewhere.) But again, the second credit union made no mention of our credit scores. We paid off one debt, and will try again later after paying the second. But the tools above really helped us. We got our credit reports, Credit Karma accounts, etc.
Apologies if you already did some of these steps, since you know your credit score already, but it's a good thing to keep on top of.
posted by Crystalinne at 11:09 AM on September 2, 2013 [4 favorites]
It's not the question you're asking, but can you put off buying a new car but instead put a substantial amount away each month for a year or so, and then buy a slightly used or CPO car in cash? No loans, no problem.
posted by a halcyon day at 11:19 AM on September 2, 2013
posted by a halcyon day at 11:19 AM on September 2, 2013
If you put down a substantial down payment, your credit shouldn't be an issue.
posted by Ruthless Bunny at 11:57 AM on September 2, 2013
posted by Ruthless Bunny at 11:57 AM on September 2, 2013
Response by poster: I went with Capital One, and got approved immediately! Thanks for the info!
I actually have enough saved up to buy a used car outright, but that would cut into my savings significantly, and I really want to build up my credit again, so I thought a car loan would be a good place to start.
posted by xingcat at 7:45 AM on September 3, 2013 [1 favorite]
I actually have enough saved up to buy a used car outright, but that would cut into my savings significantly, and I really want to build up my credit again, so I thought a car loan would be a good place to start.
posted by xingcat at 7:45 AM on September 3, 2013 [1 favorite]
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In general "sub prime" auto loans are becoming more popular recently.
posted by Wild_Eep at 9:16 AM on September 2, 2013 [3 favorites]