Rarely will sub prime lenders rely on the credit bureau score alone when making their decision whether to approve or decline financing car bad credit loans. While the FICO score is the place that they start, these lenders always look beyond your credit score to try and find an underlying pattern of stability that will enable them to approve your application. Based on experience, here are a few examples of items that may be part of a subprime car lender’s score card:

The first item is your time in the credit bureau. Many bad credit car lenders use the “In Bureau Date” as part of their score card. The longer a person has been in the bureau system and using credit, the better. This longevity means that you have a bigger credit file with which they can judge your payment history.

A second item would be your previous high credit. Finance companies may look at your previous credit high to determine the financing car bad credit loan amount that they will approve. If you’ve paid well on a large loan in the past, this generally increases your chance of getting approved for a car loan.

A third item would be any differences in paying installment credit versus revolving credit. When it comes to auto loans, many bad credit lenders either disregard or pay less attention to revolving credit (credit cards) and play closer attention to how you’ve paid on previous installment loans. The reasoning behind this is that a car loan is a type of installment loan.

Item number four is the time you’ve been employed with your current employer. The longer you’ve has been with their current employer, the better. If you’ve been employed by the same company for a number of years, it shows the lender that you have employment stability – an important factor in most credit decisions.

Item number five has to do with how long you’ve been at your current residence. If a person moves around a lot this tends to scare lenders. Consumers that change their primary residence often are considered to be “Skip Hazards”. Quite simply, this means that if a lender has to repossess a vehicle they want to know where they can find it.

Another item financing car bad credit lenders consider is your debt to income ratio. Known as DTI, it focuses not on how much you earn, but how much of your gross pay is left over after you pay your bills. In most cases, lenders prefer that all your debts, including the new car payment you are about to add, not exceed 40% to 50% of your gross monthly income (not your take home pay, but the total amount before taxes).

Lenders also look at your payment to income ratio. Referred to as PTI, you should know that most lenders prefer to approve loans with monthly payments that are below 15% to 20% of a consumer’s gross monthly income.

Finally, lenders look at another ratio: loan (amount) to value (of the car). Called LTV, it means that if you have bad credit, the more money you can contribute as a down payment, the better the loan will look to the bank. More money down decreases the loan to value of the loan and decreases the lenders risk. As an example, if you put $5,000 down on a $10,000 loan, the LTV is 50%.

Not every financing car bad credit lender uses all the items described above in their score card. But their score card, no matter what it contains, exists to evaluate the risk of your auto loan. Once a lender decides to approve a loan they use the information derived from their score card to determinate the interest rate of your loan. The higher the perceived risk of the loan, the higher the rate will be. Here are two examples:

John and Jane apply for an auto loan, for the same $10,000 vehicle, and both have a credit score of 595.

John is 24 and has been in the credit bureau for only two years. He has never had an installment loan, only credit cards. He has 6 months with his current employer and another 6 months with a previous employer, and still lives at home with his family. His income is $1,800 per month. John is trying to buy the car with $1000 down. With sales tax and registration fees he is asking to finance $9,800.

Jane is 32 and has been in the credit bureau for a total of twelve years. She has had three auto loans in which she paid okay. Two years ago she filed for bankruptcy due to unexpected medical bills. She has 8 years with her current employer and she has lived at the same address for 5 years. Her income is $3,500 per month. Jane has $2,500 cash as a down payment. With sales tax and registration fees, she is asking to finance $8,300.

The same lender is willing to approve both Jane and John. However, they view John’s loan as a riskier transaction than Jane’s. John is approved at a 22% interest rate while Jane is approved at a 13% rate.

When it comes to financing car bad credit loans, your credit score is just the starting point. In addition to your FICO score, these lenders are looking for a reason to approve your loan, based on your job and residence stability, as well as your past payment history.

The first method is vehicle leasing. Just as in a lease that you would sign for an apartment, the automobile lease financing for new car is a contract that allows you to use the vehicle for a set period of time. Generally speaking, most leases last from 24 months to 36 months, although longer leases are available.

At the time of lease inception, you normally make the first payment (lease payments are made in advance) plus a security deposit (that’s usually refundable), any license and title fees, as well as any inception fees (fees charged by the leasing company for administrative expenses). Depending upon how the lease is structured, you may also have to include money for a down payment (called a capitalized cost reduction). The purpose of the down payment or cap cost reduction is to lower the monthly lease payment.

Leasing has a number of advantages over buying:

• Lease payments are usually lower than finance payments because you’re only paying for that portion (2-3 years) of the vehicle you are using.
• Provided you are within the mileage requirements (written in the lease) with normal wear and tear, you can walk away from the vehicle when you’re done after paying the termination fee (often waived if you re-lease from the same lender).
• You never have to worry about how much the vehicle will be worth at the end of the lease. The bottom could fall out of the market and you still don’t have to be concerned about negative equity.
• If you like what you’re driving, you have first rights to purchase it at the end of the lease for an amount written into the lease contract.

Lease financing for new car can also have its disadvantages:

• You don’t own the vehicle and will never have any equity in it unless you decide to buy it at the end of the lease. Even then, depending on the vehicle, you probably won’t have any equity in it until you’ve paid off a good portion of the remaining balance.
• Ending a lease early can be difficult. Early termination charges and penalties can be almost as expensive as making the remaining payments.
• Most leases are written for 12,000-15,000 per year (with some as low as 8,000 to 10,000). Higher mileages can be written into the contract at its inception, but if your overall driving exceeds the total number of miles written into the lease, the penalties can be steep (.15 to .35 per excess mile).
• Any modifications to the vehicle that were not there at inception need to be removed and any damage needs to be repaired before the vehicle is turned back in, otherwise the leasing company can charge you for the repairs.

The first and most important step is to obtain a copy of your credit report (credit history) and your credit score from each of the three credit bureaus – Experian, Equifax and TransUnion. You can either contact each bureau individually or go to http://freecreditreports360.com and receive all three at the same time. If your credit score is less than 640, a special finance car loan is usually your only choice, while if you thought you had poor credit and your score is 640 or above, you may actually qualify for a prime or near prime loan.

The reasons for poor credit fall into two basic categories: situational bad credit and habitual bad credit. Either one of these scenarios can result in a bankruptcy or repossession showing up on a credit report. The difference is, situational bad credit can be caused by job loss or high medical bills while habitual bad credit results from someone rarely paying any of their bills on time.

Special finance car loan programs are designed for people that have less than perfect credit and these loans enable them to obtain financing for a vehicle at fairly affordable interest rates – at least when compared to “buy here pay here” or “tote the note” car lots. These loans enable customers with situational bad credit to reestablish their car credit while improving their FICO scores.

The best way to obtain a special finance car loan is through an online site that specializes in credit repair. While going to your local dealer might seem to be easier and make more sense, not every local car dealer is equipped to handle customers with situational bad credit. Rather than wasting time driving from dealer to dealer, it is smarter and easier to go online and apply at one of these sites. The legitimate ones will belong to the Better Business Bureau – thus ensuring your satisfaction – and have SSL-encrypted credit applications that ensure the security of your personal information.

to get their car financed without the stress of credit issues. With the network of subprime lenders, you can get low interest rates vehicle loan as compared to other lenders without credit check. Above all, it can also improve your credit score.

Even though your car is sitting in the driveway, if you are making payments on it, it’s the bank that really holds the ownership to it. If you look at the vehicle title, you will notice a “lien holder” section where the name and address of the bank are listed. Until you make your final payment and receive a “release of lien” letter from the bank, the car really doesn’t belong to you; it is the property of the bank.

Because of this, it’s important to keep the bank informed if you are having financial problems and you’re unable to make a payment or payments on time for car loans for people with bad credit. By calling them and explaining the problem, you might be able to set up special payment arrangements. This is especially important because, depending on the way your finance contract is worded, the bank may have the right to repossess your car if they receive the payment one day late. The bank also has the right to take the car without a court order, so if you do fall behind, don’t expect a letter in the mail beforehand.

There are two types of vehicle repossession - voluntary and involuntary. In an involuntary repossession, the bank sends someone to seize your car (either with a tow truck so it can be hauled away, or with a set of keys so that it can be driven away). In a voluntary repossession, you take the car back, yourself. If you take it back yourself, you may avoid certain fees the bank will charge you if it has to come and get your car. The effect, however, is the same and a voluntary repossession does not look any better on your credit report than an involuntary one.

Once the lender has possession of your car loan people bad credit vehicle (and the time frame depends on the state in which you live), it must notify you within a certain number of days when they plan on taking it to the auction to be sold. During this time, it may also be possible to buy back the vehicle for the balance owed plus any expenses incurred by the bank. You also may be able to reinstate the loan by paying the amount you are behind plus expenses incurred by the bank to have it towed and inspected.

There are two things that can happen at the auction: If the bank sells the vehicle for more than the amount owed, plus expenses, you are entitled to the difference. If the vehicle sells at auction for less than the contract balance, the bank has a right to go to court and seek a judgment against you for the difference between the balance owed on the loan and the net proceeds received from the auction.

If you’re having problems paying your loan, call the bank and explain your situation. Remember that a repossession is a black mark on your credit history and can prevent you from getting a car loan – any type of car loan – for at least a year.

If your credit history does include a repossession and this repossession either happened more than a year ago or it was part of a bankruptcy, you can go to a number of legitimate web sites to reestablish your credit. Many of these sites have helped thousands of people in your situation reestablish their credit. You can also find out if you qualify for a loan and even budget a car loan people bad credit for your specific financial circumstances.

Once you have submitted your bad credit auto loan apply application and have received an approval, the bank will determine your car budget. Guidelines for a bad credit car loan apply are much stricter than for a regular car loan. When you submit a credit application, the bank looks very closely at your income and expenses. In fact, the bank requires you to prove your income with pay stubs that show year to date income. You may also be required to prove job tenure with a W-2 from a prior tax year. Additional income such as child support or disability needs to be verified with court documents, determination letters and bank statements.

If you are approved, the bank determines your income relative to your monthly debts (called debt to income or DTI); it factors in such things as utility payments and car insurance and comes up with a payment that it believes you can afford. The bank will then place you in one of their tiered programs based on your credit score and credit history. This program will dictate the interest rate, contract term and down payment requirements. This bad credit auto loan apply information will then be sent to the dealer.

Once the special finance department receives the loan information from the lender, the finance manager will determine which cars in the dealer’s inventory fit the approval requirements. With most banks, the newer the car and the lower the mileage, the longer the loan term the lender will allow. So as you can see, the selection process is not as simple as it might seem.

The bad credit auto loans apply is also different from the customer’s perspective. Most customers that have not financed a car with a subprime lender choose a car based on what they like – color, model or type. It could be a 5 year old sport utility vehicle with 70,000 miles on the odometer. Even though this particular vehicle may be clean and drive nicely, the interest will be higher due to its age, and a service contract (which you’ll want, especially for an SUV) will also be more expensive. In addition, the term may also be shorter due to the mileage. In other words, it may look nice, but it also may not fit the payment call – unless the customer can come up with a sizeable down payment.

By understanding the buying process, a bad credit auto loan apply customer can avoid being disappointed by avoiding the wrong kind of car. Remember, the object is to get your credit back on track, not to get you your dream car. By sticking to the recommendations of the special finance manager and picking out the car that best fits your needs and not your wants or dreams, you will find that reestablishing your credit will be much easier and more affordable.

Rarely will sub prime lenders rely on the credit bureau score alone when making their decision whether to approve or decline financing car bad credit loans. While the FICO score is the place that they start, these lenders always look beyond your credit score to try and find an underlying pattern of stability that will enable them to approve your application. Based on experience, here are a few examples of items that may be part of a subprime car lender’s score card:

The first item is your time in the credit bureau. Many bad credit car lenders use the “In Bureau Date” as part of their score card. The longer a person has been in the bureau system and using credit, the better. This longevity means that you have a bigger credit file with which they can judge your payment history.

A second item would be your previous high credit. Finance companies may look at your previous credit high to determine the financing car bad credit loan amount that they will approve. If you’ve paid well on a large loan in the past, this generally increases your chance of getting approved for a car loan.

A third item would be any differences in paying installment credit versus revolving credit. When it comes to auto loans, many bad credit lenders either disregard or pay less attention to revolving credit (credit cards) and play closer attention to how you’ve paid on previous installment loans. The reasoning behind this is that a car loan is a type of installment loan.

Item number four is the time you’ve been employed with your current employer. The longer you’ve has been with their current employer, the better. If you’ve been employed by the same company for a number of years, it shows the lender that you have employment stability – an important factor in most credit decisions.

Item number five has to do with how long you’ve been at your current residence. If a person moves around a lot this tends to scare lenders. Consumers that change their primary residence often are considered to be “Skip Hazards”. Quite simply, this means that if a lender has to repossess a vehicle they want to know where they can find it.

Another item financing car bad credit lenders consider is your debt to income ratio. Known as DTI, it focuses not on how much you earn, but how much of your gross pay is left over after you pay your bills. In most cases, lenders prefer that all your debts, including the new car payment you are about to add, not exceed 40% to 50% of your gross monthly income (not your take home pay, but the total amount before taxes).

Lenders also look at your payment to income ratio. Referred to as PTI, you should know that most lenders prefer to approve loans with monthly payments that are below 15% to 20% of a consumer’s gross monthly income.

Finally, lenders look at another ratio: loan (amount) to value (of the car). Called LTV, it means that if you have bad credit, the more money you can contribute as a down payment, the better the loan will look to the bank. More money down decreases the loan to value of the loan and decreases the lenders risk. As an example, if you put $5,000 down on a $10,000 loan, the LTV is 50%.

Not every financing car bad credit lender uses all the items described above in their score card. But their score card, no matter what it contains, exists to evaluate the risk of your auto loan. Once a lender decides to approve a loan they use the information derived from their score card to determinate the interest rate of your loan. The higher the perceived risk of the loan, the higher the rate will be. Here are two examples:

John and Jane apply for an auto loan, for the same $10,000 vehicle, and both have a credit score of 595.

John is 24 and has been in the credit bureau for only two years. He has never had an installment loan, only credit cards. He has 6 months with his current employer and another 6 months with a previous employer, and still lives at home with his family. His income is $1,800 per month. John is trying to buy the car with $1000 down. With sales tax and registration fees he is asking to finance $9,800.

Jane is 32 and has been in the credit bureau for a total of twelve years. She has had three auto loans in which she paid okay. Two years ago she filed for bankruptcy due to unexpected medical bills. She has 8 years with her current employer and she has lived at the same address for 5 years. Her income is $3,500 per month. Jane has $2,500 cash as a down payment. With sales tax and registration fees, she is asking to finance $8,300.

The same lender is willing to approve both Jane and John. However, they view John’s loan as a riskier transaction than Jane’s. John is approved at a 22% interest rate while Jane is approved at a 13% rate.

When it comes to financing car bad credit loans, your credit score is just the starting point. In addition to your FICO score, these lenders are looking for a reason to approve your loan, based on your job and residence stability, as well as your past payment history.

Once you have done this, the next step is to apply for an auto bad car credit loan new at one of the legitimate web sites that offer this service. To ensure you are working with a company that has your best interests in mind, be sure to look for the Better Business Bureau seal on the site. This means the company responds to any issues you might have in a timely manner as well as adheres to the principles of the Better Business Bureau.

You should also make sure the credit application you are filling out is SSL-encrypted. This means that your personal information is sent securely over the internet and cannot be read by outside parties.

Once you have been contacted by a dealer, the next step is to understand how to read a car window sticker. This is the information that, by law, must be posted on every new car in a dealer’s lot. Here is what you should see:

• Standard equipment. These are the standard features included in the vehicle’s Manufacturer’s Suggested Retail Price (MSRP).
• Vehicle identification number (VIN). Make sure that this is the same number that appears on the vehicle’s VIN plate that appears in the lower left corner of the windshield and that it’s accurate in all the paperwork related to the vehicle.
• Manufacturer suggested retail price. The MSRP (also known as the “retail” or “list” price) is the base price, before options and delivery charges are added in.
• Optional equipment. These are extra-cost features over and above the standard features the vehicle has that get added onto the MSRP. Option packages (that is, packages that contain two or more options) can often be more cost effective than choosing individual options.
• Destination charge. This dollar amount covers the delivery of the vehicle from the factory to the dealership. This should be the same for all models within the same brand (you can verify this by looking at the window stickers of similar models). It doesn’t depend on actual shipping distance, so it is the same for all dealers anywhere in the United States (with the possible exception of Hawaii and Alaska).
• Fuel economy. City and highway figures are based on the Environmental Protection Agency (EPA) fuel economy estimates. These figures now reflect reporting methods that were modified for the 2008 model year and more closely reflect actual “real world” fuel economy numbers.
• Total Cost. The “sticker price” is the total MSRP price, including the base MSRP, options, option-package discounts and destination charges. This does not include applicable state fees that may include state taxes, state title fees, or state registration fees.
• Emissions information. This number reflects how the vehicle is ranks in smog emissions as compared with other vehicles of the same model year.
• Parts content information. This area will tell you the countries of origin from which major components (such as engines and transmissions) were sourced. The final assembly plant location is also listed.
• Government safety ratings. New for the 2008 model year are the National Highway Traffic Safety Administration’s (NHTSA) vehicle star ratings on front and side impact crashes and risk of rollover for this particular model.

The first requirement is income. For most auto loans for bad credit, the lender will require a minimum monthly W-2 (regular employee) income of $1,800 if your credit score is less than 640. This figure is for your gross income, meaning the amount you are paid before withholding and Medicare/social security taxes are taken out. Lenders are looking for this minimum so that you can afford a car payment and full coverage insurance in addition to your other bills.

This income requirement is, if you will notice, for W-2 employees. This means that your employer furnishes you with a W-2 income form at the end of the year that reports your wages. If you receive a 1099 form (which means you are an independent contractor) or you are self-employed, the situation becomes much more complicated. Due to current economic conditions, most bad credit lenders will not accept anything other than W-2 employees. Those lenders that might consider self-employment income will only do so with three previous years of income tax statements that have been professionally prepared. You may even be required to furnish bank statements to support your stated income.

The next requirement is your employment, itself. As a rule, most auto loans for bad credit lenders will require at least one full year with your current employer as well as three years of verifiable employment history.

A third requirement is your age and citizenship status. All auto loans for bad credit applicants must be at least 18 years of age and U.S. citizens. There are no exceptions to these two rules.

The next requirement has to do with the status of any bankruptcies. Again, as a rule, most lenders will require that all Chapter 7 bankruptcies be discharged. If you are currently in a Chapter 13, you must be at least half way through and obtain an order to incur additional debt through the court (this is accomplished through the trustee).

The final requirement has to do with vehicle repossessions. You need to know that all lenders will look at any repossessions in your credit history. If you have any within the past year, they/it must be included in a bankruptcy (this includes voluntary or involuntary repossessions). If you have a repossession that occurred before or after your bankruptcy, you will not qualify for auto loans for bad credit.

That pretty well sums up the basic requirements. If you have any more questions, there are a number of legitimate web sites where you will find additional information on auto loans for bad credit as well as an SSL-encrypted application that you can fill out in the privacy and security of your own home. These sites have helped thousands of qualified applicants with bad credit obtain reliable transportation and reestablish their credit at the same time.

Standard auto loans are those loans offered by banks and other independent lenders and are usually based on the prime rate plus a mark-up. Under most circumstances, these standard auto loans have a fixed interest rate that is adjusted for the loan term. The base loan term is usually 24 months. As the loan term increases, the interest rate usually rises with the highest interest rate corresponding to the longest loan term - anywhere from 60 to 84 months, depending on the lender. The reasoning behind the rate to term difference is that lenders need to take into account the possibility of future interest rate increases.

Subvented low rate auto loans are an entirely different breed. Unlike standard auto loans, these interest rates are set artificially low in order to entice car buyers into dealer showrooms. The lender is not an independent bank or lending institution, but one of the captive finance companies of the auto manufacturers. The car manufacturer supports these lower interest rates with a subsidy that is paid to the captive finance company. This money enables the finance company to charge the customer a rate that is below normal market rates.

But beware, there is a catch. In order to qualify for this special rate, you have to buy a specific vehicle or among a group of vehicles for a set loan term that is often limited to 24 or 36 months. If you require a longer term, you either have to forego the special rate or, in come instances, settle for a higher subvented rate.

One more note: In order to qualify for either a standard low rate auto loan or a subvented low rate auto loan, you need to meet certain minimum credit criteria. Not all buyers will qualify and those with bad credit (a FICO score of less than 640) will, in most cases, not qualify for these types of loans.

How do you choose a dealer for a bad car credit financing loan? Is there any reason why you shouldn’t just jump in your current car and drive down to the local auto mall to shop for a car instead of visiting one of the legitimate online car loan web sites? This really depends on your credit history and your FICO score.

If you have a credit score over 640 and a fairly extensive credit history (including automobile credit), you should be able to purchase a vehicle with a traditional prime or near-prime auto loan. But even if this is the case, you should still do some research on the internet. As an example, Consumer Reports has an excellent web site that enables you to view the repair histories of most cars, so that you can see how the vehicle you’re interested in compares with the other cars or trucks in its class. If you search Google Maps for car dealers in your city, such as “(your city) car dealers”, you’ll not only get dealer locations, you can read dealer reviews as well.

If you have less than perfect credit, however, you may want to hold off driving around town. Here’s why: the bad car credit financing loan buying process is much different. And just as the bad credit buying process is different, so is the dealer that can help you with a bad credit car loan.

The fact is, many dealers choose not to deal with subprime lenders. Subprime loans require more effort than regular loans in the sense that dealers are responsible for more documentation and for making sure that the documentation is correct as well as verifiable. If anything goes wrong in the documentation process, the contract is sent back to the dealer and the dealer holds the contract for the car. This means the dealer must collect the monthly payments from the customer and dealers do not want to do this.

As a bad credit car buyer, it’s important to realize that just because a dealer happens to sell cars near in your neighborhood or city does not mean that dealer has the right kind of cars. A dealer’s new and used car inventory also has to be adjusted for subprime lending. Cars in inventory have to meet lender guidelines in terms of mileage and year. The used cars also need to be purchased at or below NADA or Kelley wholesale, since subprime lenders base their “advance” (how much they will finance) on these figures. New cars also have to be within a certain price range, since bad credit lenders are very strict about keeping your car payment within a budget range. Without the correct inventory, the dealer can’t sell any of the cars on the lot to subprime customers.

In addition to documentation and inventory issues, there is the large number of subprime lenders as well as the complexity involved with understanding the varying programs that they offer. Most subprime lenders have at least five “tiered” programs and each program can have its own set of requirements. Without a knowledgeable special finance department, keeping track of the lenders and programs is impossible.

There is a good reason to visit a bad car credit financing loan web site. The best of these sites have helped literally thousands of people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. Their national network of affiliate dealers specializes in bad credit car loans and they can help you reestablish your credit while driving a new or low-mileage pre-owned car and get you back “on the road” to better credit and a higher FICO score.