Finding yourself searching Bad Credit Car Loans can be a frustrating experience. Resulting from poor credit and lack of ability to obtain traditional financing you may feel limited, even isolated. But before you judge yourself too harshly, allow us to remind you that you are hardly alone. Why? Because regardless of credit score, income level or financial security, one simple fact stands true:
Everyone Needs a Car
Okay, maybe not ‘everyone’ once you factor in the popularity of certain modes of public transportation and the general inconvenience of urban car-owning. Sure, we could also discount some citizens of underdeveloped lands and primitive tribes, but let’s not lose the point of this piece. Bottom-line: most Americans find owning a car helpful in meeting the demands of their lifestyle.
Considering that less than 15% of Americans are able to buy a vehicle outright (paying cash) this leaves the vast majority to secure financing in order to purchase the vehicle they need. In fact, an estimated 107 million Americans had active car loans as of 2017 (an increase of more than 33% since 2012).
But here’s the kicker. Of those 107 million ‘financed Americans,’ approximately 5% are late on their payments by 90 days or more. With even more falling within 30-90 days late, the epidemic of delinquency is all-too real. And delinquent car payments might indicate struggles making other payments, as well. With the natural end-result being poor credit standing, it’s easy to see that you might not be as isolated in your struggle as you had originally thought.
How Did This Happen?
The word delinquent is arguably one of the more uncomfortable words in the English language. Implying a lack of responsibility and follow-through, being branded as delinquent feels like a slap-to-the-face. Why? Because in many cases the inability to pay one’s bills are not a result of questionable character or lack of work ethic. A sudden loss of employment and costly medical expenses are just two of the factors that could have drastic effects on someone’s finances.
While approximately 61% of Americans do not have sufficient savings to cover six months worth of expenses, there is a more staggering statistic. Nearly half of Americans are living paycheck-to-paycheck, and say that an unexpected expense of $500 would be detrimental to their financial security.
Think about that. The cost of a simple car repair, house maintenance, emergency purchase of an appliance or injury could send approximately 50% on the path to delinquency.
But Everyone Needs a Car
Okay, you probably heard us the first time. Yes, it doesn’t matter that half of the American population is teetering on the edge of financial oblivion because they need cars. If things are going to get better, people need to be able to get from Point A to Point B (the former being home, and the latter being their place of employment). How else are they going to earn the money needed, to take that first step of building their minimum safety net?
It’s this need that has fueled the surge in car buying that we’ve seen in recent years. In fact, 2016 saw 17.6 million vehicles purchased, meaning that nearly 15 million Americans have placed themselves further into debt by financing their vehicle.
If it feels like these statistics are trapping you in an endless and vicious circle, it’s okay. Don’t get us wrong, you are absolutely trapped, but so is almost everyone else. To be financially secure, we need money. To earn money, we need a job. To hold a job, we need transportation. To secure transportation, we need financing. To secure financing, we need financial security.
You are just one of more than 275,000,000 Americans who face this struggle everyday.
It’s a matter of balanced expectations. Just because you have sub-prime credit doesn’t make you beholden to sub-par vehicle choices. Then again, don’t swing for the fences and try to get your dream vehicle.
Rather than focus on new vehicles, give some attention to used inventories. Not only could you find a more affordable option that falls within the last few model years, but you may actually be getting more car for your dollar by side-stepping the depreciation experienced by new cars.
After all…”new to you” is still new.
And even more importantly, don’t rush head-first into financing. Just as patience and an open mind will benefit you in finding the right car, the same attributes will help you in your search for financing.
First, remember that many people assess their own credit score based solely on the “number” or by their inability to secure a mortgage. The simple fact is that the criteria for mortgage approvals are far more stringent than those for auto loans. So, don’t jump to conclusions.
Talk to your bank or financial institution. If you are unable to secure financing there, you may also want to look into local credit unions, or research financing groups that specialize in auto loans.
Last, but not least, are the finance teams at the car dealership itself. Before you let pride get in the way, remember the statistics. While you may not be comfortable with your current financial status, dealerships are used to helping customers with subprime credit. It’s a reciprocal relationship: you need a car, and they have cars that need to be sold.
All you need to remember is to take your time.
Stop Your Head From Spinning
Breathe. At the end of the day, you have options available to you. Take the time and do the research to make sure that (i) your choice of vehicle suits your needs and, more importantly, your budget and (ii) you choose a financing option will the least negative impact on your already-sensitive finances.
There is a light at the end of the tunnel, and with diligence you can get there. The vehicle you drive on that journey remains to be seen.