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Second Chance Auto Loans Online
In years past, if you had bad credit, a bankruptcy, or repossession in your credit history, it was virtually impossible to apply for auto loans through automobile dealerships or even directly through the auto finance firm; the answer was almost invariably “no”. This created an uncomfortable and embarrassing experience for many people that found the car that they wanted at a dealership, only to be turned away. With the advent of the Internet, giving consumer’s ability to search for an online auto loan, automobile dealerships and auto loan finance companies now have to compete much more vigorously to get a consumer’s attention, let alone their business; today, it is a borrower’s market. As a result, second chance auto loans and other online auto loan products have become readily available to consumers looking to apply for auto loans online to purchase new or used cars, regardless of their credit history.
All Second Chance Auto Loans are Not Created Equal
Although automotive dealerships and auto finance companies are currently operating in a highly competitive “get every buyer that they can”; type of environment, not everybody applying for second chance auto loans will be in the same boat. One important thing to remember is that automotive dealerships and lender’s will consider you and your vehicle loan in regards to how much risk that they feel you represent as a borrower (i.e. what is the chance that you will make your car payments on time and completely?) This assessment of risk is based upon a formula, unique to each dealership or lender, that is calculated using facts about you that you provide, facts about you available through the credit reporting agencies, your income, and other factors. Some negative factors that might be considered when you apply for auto loans are:
• How long ago was the last negative entry on your credit report?
• Do you have accounts that are currently in arrears or in default?
• Have you had a car repossessed in the past few years?
• Are you currently in bankruptcy, or has your bankruptcy been discharged?
• How low is your credit score?
• What is the ratio of how much credit that is available to you (e.g. credit cards and open loans) as compared to your debt?
That being said, there still are factors that can mitigate an automotive dealership or lender’s risk to positively influence the outcome of your application:
• Do you have money for a down payment available? Even if a down payment is not required, making one can be a smart thing to do. The down payment can be a smaller token amount, like $250 or $500. This will let the dealership or lender know that you mean business and that you are more likely to make your payments in a timely manner, as you now both have a stake in the vehicle. Still and all, it makes great sense for you to make as large of a down payment as you can afford. Doing so will give the dealership or lender confidence in you, and it will give you the ability to negotiate a better interest rate.
• Is there someone that you know with a good credit history that would be willing to cosign on your online auto finance application? A cosigner with good credit, usually a family member or close friend, would immediately put you into a better loan with better terms and a lower interest rate.
• What is your income? Obviously, the higher your income, the better that the dealership or lender will feel about approving your auto loan.
Note, see also our recent article “How to Get Approved for an Auto Loan with Bad Credit if you have Low Income”; for more information.
• What is the ratio of your rent or mortgage payment as compared to your gross income? A scarcely known fact is that automotive lenders and dealers pay close attention to this figure. For example, if you make $1,500 per month income, and your monthly rent or mortgage payment is $500, then your housing cost takes 30% of your monthly income. Anything beyond 40% or so will send a warning to the lender or dealer and they might need to be convinced that you will be able to make your monthly car loan payments on time. Take this into consideration when you fill out your auto finance application.
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