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Lots of companies advertise "bad credit" financing for those who have black marks on their credit reports. In reality, if you've been plagued by financial problems in the past, you have one of two options. You can either qualify for a loan at a less favorable rate, or you can work to eliminate the negative items from your report. As it turns out, most people go with option one, simply because it's the easiest.
No matter how many "incidents" have been reported to the three major credit agencies, there is always a lender who's willing to extend you a line of credit. You'll wind up paying a 25-, 30-, or 35-percent APR, but you'll qualify for a loan nonetheless. While this may be a cause for celebration in your household, consider this: Over the course of a five-year loan, you may well end up paying for your car several times over. Not exactly a reason to bust out the confetti and streamers.
Repairing Bad Credit
If you don't know what's on your credit report, there's no way you can set about rectifying the problem or problems. By law, you are entitled to one free copy of your credit report, though there may be some administrative costs associated with ordering it. Better to suck it up and pay the nominal fee than to continue on blindly in the dark hoping for divine intervention or a winning lottery ticket.
Now that you have your credit report in front of you, you should be able to see why you're only qualifying for exorbitant interest rates. If you feel that any of your "dings" have been placed there by mistake, you have the right to dispute these incidents. You may, however, need to contact the creditor who placed them there to begin with. Another option is to write directly to your credit bureau and explain your plight. The bureau can then tell you the fastest way to resolve your outstanding credit issues and clean up your record.
Car refinance companies are not only in business to help you save money; they're there to earn profits of their own as well. To that end, each refinancing company has its own particular terms and conditions that applicants must agree to meet. Some of these are straight-forward and understandable. Others may seem strange, especially to first-time re-fi candidates.
If your credit is immaculate, you'll be held to few, if any, restrictions. Any signs that you are able to repay your loan on time and in full work in your favor, as these help lenders hedge against risk. While you may know that you're not a credit risk, your prospective lender does not. Thus, in the world of finance, responsibility is rewarded with more favorable terms. When you consider that lenders are competing for the most qualified borrowers, this makes perfect sense.
Your Re-Fi Company's Terms
While some companies will allow you to refinance any type of vehicle you please, others restrict you to cars and trucks. Recreational vehicles, motorcycles, ATVs, and custom-built cars are typically off-limits. You may also be forbidden from refinancing any sort of commercial vehicle such as a taxi or limo. If your car has no VIN or accompanying paperwork, it's also a safe bet that your refinance company will back away.
It's also common business practice for refinance companies to require pre-existing liens on the vehicles in question. That is, the company will not simply agree to refinance more than the balance of what you owe, then hand you a check for the difference. While you may find this option on certain types of home refinancing products, it typically doesn't pay for companies to apply this to their auto loans.
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