Bad Credit Auto Financing for People with Poor Credit Ontario
More and more people are searching for auto financing for bad credit. With household debt being at an all-time high, credit ratings keep dropping. Just a few years ago, individuals with low scores found it nearly impossible to be accepted for a car loan. Today, things have changed. Banks and lenders have realized that with the increasing debt, opportunities do exist to not only help consumers get a loan, but to help them rebuild their financial reputation once again. Many have begun to offer auto financing for bad credit to individuals who might not get approved from more traditional lenders.
In an ideal world, individuals have the opportunity to save the money to pay cash for large purchases such as furniture, college tuition and vehicles. But that financial utopia exists for very few in, if any, our society today. Even those who don't pursue the latest, most expensive trends need to borrow money to cover costly items and have trouble repaying debt. Some encounter financial hardship for just a brief time, but dropping scores may follow them for years to come.
Many lenders are now extending loans to these "high risk" or "subprime" individuals. Auto financing for bad credit borrowers comes in many forms. Consumers can file applications with their own bank or credit union, which will often now extend additional financing to current customers. Most car dealerships also have contacts with lenders who specialize in auto financing for individuals with lower financial scores. Plus, hundreds of web-based companies will offer private loans with interest rates that top local banks and dealerships.
Although finding auto financing for bad credit is easier than ever before, it is not without its problems. Borrowers with lower ratings will be expected to make a larger down payment as well as pay higher interest rates. Percentages vary from state to state, but high-risk consumers should anticipate paying interest rates between 7% and 18% where lower risk individuals will generally receive lower interest rates. The time scheduled to repay the loan will also be extended to lower monthly payments - sometimes as much as 3-4 years. Combined with higher interest rates, the total amount of money spent will actually be higher than loans given to people with better ratings.
But consumers still need to be aware. Some lenders who promise easy auto financing for bad credit can get borrowers into even more hot water. Some automotive dealers abuse the system. They artificially inflate vehicle prices and interest rates of their loans. Others try to convince consumers that extra amenities such as extended warranties and added insurance are non-negotiable. Make sure to read all documents thoroughly. A few lenders have used a bait and switch tactic, claiming that the initial loan "fell through" and must be replaced with a higher-interest loan. "Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves. Ye shall know them by their fruits. Do men gather grapes of thorns, or figs of thistles? Even so every good tree bringeth forth good fruit; but a corrupt tree bringeth forth evil fruit. A good tree cannot bring forth evil fruit, neither can a corrupt tree bring forth good fruit. Every tree that bringeth not forth good fruit is hewn down, and cast into the fire. Wherefore by their fruits ye shall know them." (Matthew 7: 15-20).
Always enter the process armed with knowledge. If possible, negotiate a loan before deciding to purchase a vehicle. Not going through a dealer may eliminate a first choice of an automobile, but may secure a more affordable loan. Also, consumers must know their credit score. Some lenders may fabricate, even lower, a customer's rating in order to negotiate a more costly loan. Reports are available for free on many online websites, but to obtain a more accurate rating, consumers must contact each of the three credit agencies: Equifax, Experian and Trans Union. Experts advise to check these reports annually and correct any errors immediately. Misinformation can lower ratings and jeopardize future loan applications. Cancel unused credit cards and limit the amount of finance requests, which also lower ratings. Finally, shop around. Compare rates and deals offered through banks, dealerships and online lenders. Many online companies have a network of lenders who specifically focus on auto financing for bad credit and can often get consumers better deals. But even websites vary in their scope. Some deal with hundreds of lenders nationwide while others focus on a local region.
When applying for loans online, most web companies focusing on auto financing for bad credit will need basic personal information such as full name and social security number as well as specific information about rent or mortgage, length of time at current address, and addresses from the past seven years. They will also question borrowers about recent bankruptcy, report numbers, and even alimony support. Before applying, review financial history, prepare all documentation and decide how much to borrow. This will make the application process easier and quicker to complete.
The good news is that credit ratings are always changing. Ideally, lenders are looking for individuals with a minimum monthly salary of at least $1,600 and a rating of 680 or higher. Consumers with lower ratings can auto financing for bad credit with a little more research and effort. People with ratings below 550 should consider further financial planning before applying for an automobile loan. Very few lenders will approve loans for individuals with ratings so low. However, one's score can be improved in as little as one year.