Are problems with credit keeping you down? Do you have troubles in getting car loans? Do you feel you must drive a 10-year-old beater around for the rest of your life due to a past problem with credit? What can you do to mitigate the problem and help restore your credit rating? And how can you get that car loan you so desperately now need?
Perhaps the first thing you need to do in the case of a problem with credit is get a decent, honest evaluation of your financial picture done. An important part of this would be a current credit report. In order to “clean-up” your credit report, you need to pay off any outstanding debt that you can, especially if it's overdue. Work with your creditors to set up payment plans and get those creditors to make positive reports to your credit bureaus as you improve your profile. Eventually, the positive information will “bury” the negative and show that you are on the track towards financial stability.
Another thing the current credit report does for you is let you know what you are dealing with when you go into a new creditor for a loan. Even if the information about any previous or current problem with credit is bad, its better to know it when you go in than have it brought up to your surprise. If you know about it, you can explain to your new creditor how it happened, and how its being repaired. This can help them to make their decision about granting you new credit.
Lowering your overall debt is also an advantage, since; people who need less money are more likely to get loans than those who need more. Strange though it seems, people who have a problem with credit, though they are more likely to need money, have a tougher time getting loans. When a bank or financial institution sees that you have less debt, it shows them you are able to control your spending, and that you have more available income with which to pay their new loan. This can make it easier for you to get approved. Also, you will be building a record of paying your creditors, and new creditors will assume that they too, are more likely to be paid on time.
Another way to help yourself is to maintain some savings. This is another way to show financial stability, and responsibility, especially while trying to overcome problems with credit. It shows perspective too. The old adage “pay yourself first” is the key when you start saving. The idea is that when you get paid, if you first set aside, say 10 percent of your income for your long term savings, and yet still have money for your bills, and discretionary spending, you will maintain a secure financial picture.
Obviously, this program of overcoming a problem with credit is not a quick-fix deal. It must be a lifelong program. If you are aggressive at first, and have enough money to lower your overall debt quickly and dramatically, you will be well ahead of the game. But it must be recognized that you may not be able to overcome this issue in just a few weeks, or even months. It may be necessary to find some means of getting to work without a new car while you get your program off to a good start.
When the time does come for you to apply for your new car loan, several items must be taken into account. A past problem with credit can be a large burden to carry so you must plan how you will approach your prospective creditor. Honesty is the best policy, but more information than the bank needs can also be damaging. Don’t volunteer disparaging information unnecessarily.
Also, try to be prepared to make a significant down payment on your new loan. This does several things for those trying to overcome a problem with credit, as well as anyone else. For one, it lowers the necessary loan amount. For another, it shows your earnestness to pay off the loan. For both reasons, it can also lower the rate you will be asked to pay for the loan. If the down payment is sufficient, it can also lower the term of the loan, costing you much less in the long run. Lowering the term of the loan can often be more of a cost-saver than a lower rate, so keep both in mind.
Often, car lenders will request something in the neighborhood of 30 percent of the value of the auto as a down payment against the new loan if the vehicle is used. Because of the markup involved, new car loans often require much less of a down payment. But a new car paid for with such a loan will often lose more value quicker. People with past problems with credit can ill afford to give away so much for a car that loses so much value so fast.
It's important to gauge the use of your new vehicle against its expected lifetime. Ensure that you have the car paid for before it is expected to be worn out. In general, used car loans are best kept at below 3 years. A new car loan should not be extended over 5 years if at all possible, and the lower the better. You just have to look hard at your budget, and ensure you are not asking for future problems with credit by overextending yourself, especially for a shiny new car that you can ill afford.
The car you buy can actually be a large part of your overall plan to overcome a problem with credit. If used properly, it can save you time and money in commuting to work, make you more productive, and allow you to move forward in your program of getting back to financial stability.
|
About The Author
RNCOS (rncos.com), formed in 2002, offers outsourcing solutions for your business needs and aims to put an end to your information pursuit. We provide e-publishing solutions, which constitutes articles, newsletters and content for magazines and bespoke work. At RNCOS, we provide you complete e-publishing solutions and online help. We offer the best in technical writing, editing, and illustration for digital and printed documentation. For further information write us at info@rncos.com.
|
This article was posted on August 07, 2005
