The economy can be pretty tough on people these days. It's not surprising to sometimes find yourself facing problems such as late payments on your mortgage or credit card. Many people even find it difficult to finance the purchase of a car. Studies show that less and less people are opting to buy cars each year, primarily due to financial problems. For those with weaker credit scores, it's still possible to purchase a much needed car through the help of second chance auto loans.
Understanding Second Chance Auto Loans
Second chance loans provide people with low credit scores a means to purchase cars they need for everyday traveling. These loans also serve to help them redeem their credit rating, hence the term "second chance". These loans are risky for the providers and are expected to incur high interest rates and expensive fees.
As long as the borrower has a stable source of income and a guaranteed means to pay back the loan, second chance loan providers can come up with financial workarounds that make it possible for the borrower to get the car that he needs.
How To Get Second Chance Car Loans
First, you need to know where you stand. You will need to obtain a credit report and determine your FICO score (which most lending companies use to assess if you qualify for a loan).
Many car dealers work with certain lending companies to provide second chance auto loans for potential buyers. Start with your car dealer first and see if you can avail of second chance financing through them. Most car dealers are affiliated with top lending companies though, making it more difficult for you to obtain bad credit financing.
Basic Requirements of Second Chance Car Loans
The requirements for getting second chance auto loans are quite similar to those of regular personal loans, with the exception of credit rating. This will depend on the car dealer and on the loan provider though. Here are some of the factors that might affect your loan application approval:
- Net monthly income
- Existing debt and loan payments
- Your budget for the purchase
- Recent financial transactions
- How much you are willing to pay as downpayment
- Your FICO score
- Whether you've filed for bankruptcy before or recently
- Whether you have a reliable and stable source of income
You will be advised to select a car that has a reasonable price and manageable monthly payment scheme. Second chance auto loan providers may be more than willing to work with you but they may not be able to pull a Porsche out of a hat for you. Remember that your goal is to get the car that you need and repair your bad credit along with it.
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