Loans with bad credit history


It's not always about IF you will be approved for a loan, so much as WHAT you'll be approved for. In November 2014, my car died and I thought it was going to be the end of the world because I only had $2, 000 that wasn't allocated towards other bills and my credit SUCKED. I had a 585 TransUnion score, and the Equifax and Experian with in the 550's. I did a ton of research on dealers that offered loans with bad credit (not buy here, pay here) and internet loans that were "100% Approval Guaranteed". Now, let me stop right here- DO YOUR RESEARCH. If you research these internet loan sites, you'll find most of them throw your credit application out to about 5 lenders to see what terms they come back with. Since it's all done around the same time, I'm told it only counts as 1 Hard Inquiry on your credit. Nonetheless, many of the loans will come back with approvals at high interest rates, but what you need to watch out for is the terms under which you can purchase a vehicle. A lot of them will have limits on how old the car can be and how many miles the car can have.

After reading through all the information, I decided the internet loan deal wasn't really for me; so, I continued to investigate dealers that would provide loan terms with bad credit. After pouring over hundreds of blogs and other sites, I remembered seeing 1 blog where someone was able to obtain a loan through CarMax- which was perfect because the car I wanted was there for about the price I wanted to pay. I called my local CarMax dealer and spoke with a salesman. I explained NOTHING regarding my credit situation or what I was looking for, other than the car I wanted. He called me back within an hour and provided terms from 1 lender that would finance me- American Credit Acceptance. Again with the research, I poured over reviews and information from current and previous customers. The reviews are less than perfect, but they're the ones helping me out so a lot of negativity was easily dismissable.

I decided to proceed with the loan. After $2, 000 down payment (only $400 down payment was required), warranty and gap insurance, I financed about $17k at 18% interest over 72 months- making my payment about $400/month. For a 2012 VW Jetta fully loaded with 23k miles on it, not too bad- only considering my credit situation. Now, here's where you have to find the value out of these loans. These loans are designed for people, based on past credit history, that are likely to miss payments or stop paying altogether. Of course the finance company is going to charge you high interest. If you stop paying after 6 months, they have about $2k that you've paid them in interest, plus your downpayment. They've already made money off of you so they could care less if you stop paying for the car after 6 months. What this loan does for YOU, as a newly responsible credit builder, is give you a chance to repair your credit and work towards the goal of obtaining a loan with a better interest rate. After two months of having the loan, and only one installment completed, my TransUnion score has increased to 613 and Experian and Equifax are going up as well.

With the research I've done, I'll continue to pay my car loan while I finish paying off my $3, 000 delinquent student loan. By the time the student loan is in good standing, I should have a score worthy enough for an unsecured card from CaptialOne. Depending how quickly my credit score rises will determine how quickly I apply for the loan, but I am treading carefully as I don't need anything screwing up what I've already done. Moving forward from that, I plan to either trade in or refinance the car I have in early of 2016 in hopes of a better interest rate so I can pay more on the principal than the interest.

Interesting facts

  • A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral...
  • People's Choice Credit Union (previously Australian Central Savings & Loans) is an Australian credit union headquartered in Adelaide, with branches in metropolitan Adelaide, regional South Australia, the Northern Territory, New South Wales, Victoria and Western Australia. People's Choice is one of the nation's leading credit unions, with over...

Additional information

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