Bad credit? Re-establish your credit with a car loan!

Do you have bad credit? Do you feel you won’t be able to get a loan from anywhere? Don’t worry, you are not alone!

For most of us the second biggest purchase in our lives, after a house, is a vehicle. It’s not always luxury but a necessity. Trying to keep up with both ends is not always easy and sometimes misfortune comes knocking on your door and starts hammering down on your credit score for various reasons: bankruptcy, late payments, collection, repossession, a divorce or even just being self-employed or being new to the country can cause headaches. The bottom line is that you end up with a low credit score.

“In Canada in 2011 personal bankruptcies dropped by 16%, while consumer proposals increased by 6.4%. Overall there were 77,993 personal bankruptcy filings, and 45,006 consumer proposals filed, for a total of 122,999 filings.” - Office of the Superintendent of Bankruptcy

This article will show you how a car loan can help you rebuild your credit history and regain the financial institution’s trust.

Probably the best thing to help you rebuild your credit score is a car loan. Why? Because it involves a substantial amount of money and there are many programs available for credit issues not just from banks but from other financial institutions as well like Carfinco and Rifco.

“Bad credit auto loans are designed for people who have a less than stellar credit history…” - Lisa Armstrong, Bubble Economy.

Before going further, you need to cover your base and make sure you have a source of income and that you are determined to rebuild your credit score. You will also need to deal with a good professional Business Manager that is specialized in credit issues so he can build a solid case to submit to financial institutions.

So without further due, here is the plan:

You sit down with the Business Manager of your preferred dealership (that deals with credit issues) and you listen very carefully at what he has to say. Be as honest as possible. Remember that his paycheck is directly related to whether or not he gets you approved. In most cases, the Business Manager will tell you how much you can afford and will also direct you towards a short list of vehicles you can choose from. It may not be the ride of your life, but have faith, it is only temporary and you need a set of wheels, don’t you?

Now this is where the ball hurts. There is a good chance that your interest rate will be high, usually between 10% and 30%. Remember, the financial institutions don’t trust you and you have to gain back that trust, but unfortunately until then, the risk for them is high and this is reflected by high interest rates. Be wary of in-house loan, these loans are often extremely expensive and most of the time no data is sent back to credit bureaus therefore has no effect on your credit score. Remember that you want to rebuild your credit history so you do want the credit bureaus to know you are making your monthly payment on time.

This is where it gets interesting. If you are steady and make all your payments on time for the first 10 to 12 months, you may very well become a favorable client to financial institution and they will most likely drop you interest rate after that period and allow you to refinance your vehicle. Guess what, you may even be able to trade that vehicle for something more to your likings.

 
So this is how you gain back the financial institutions’ trust and re-establish your credit while driving a vehicle that you love for a payment that you can afford!!!