Topic: Help! bad credit situation

[ronnie]

I'm 23 years old and need a car for my job by the end of summer.  I pulled up my Equifax report and score and as expected - not good.  My score is in the 500's!! This is due to defaulted student loans that I'm now in the process of paying of.

I going to have about $2k as a down payment and I've been at the same job for 1 yr.  I'm hoping to get a 2000-2003 Honda Civic; I need something reliable.  Do I have a chance of getting financing?  How do I go about doing so with my situation?  Need expert advice!!!

TIA

[hondasalesguy]

You will not likely get financed through traditional lending sources. And unfortunately the high risk lenders are basically just legal loan sharks. You will get raped on interest rates.

Get Dad to cosign, (Assuming his credit rating is good) than you can tag along as the co buyer, have the payments come out of your account, and establish your credit, so that in 5 years you can probably qualify on your own.

Not to nag, but how can the government afford to loan out money year after year to students when a high percentage of them default?

[hondasalesguy]

Also, if you are going with a co signer, and are looking at 2003 Civics, you may as well look into brand new, Honda Canada Finance Inc. has a $500 grad rebate program for buyers of new vehicles, and interest rates as low as 1.9% on new Civics to clear them out before the all new 2006s arrive. So a new 2005 may cost less per month than a used 2003.

[Sterling]

Chrysler Credit has some of the most liberal lending guidelines of any of the mainstream lenders. If they won't buy you then you'll have to through a sub-prime lender where you'll be looking at rates of 12-28%.

It's impossible to tell by credit score alone, but if your credit is bad enough, a co-signer may not help.

[ronnie]

Hondasalesguy:

I defaulted on the loans while working a retail after college.  My mom was laid off and I had to cover the rest of the bills with the my savings and p/t job.  We moved and I sent National Student Loan Centre my new address and filled out a loan defferal form.  They claim they never received it and are trying to investigate my case. Since getting my current job I have been making payments.  I always had full intentions of paying back my student loans.

I found a full-time job and have been working my ass off for a promotion.  More $$ means I can pay off my loans faster.  But I need a car.

My Dad lives in Vancouver and I don't think my mother is the best candidate to be a co-signer.  I might be able to get a family friend to co-sign.  How good of credit does he need to co-sign?  Would $2K be enough for a downpayment on 2005?  

I think I'm on my own with this. If I go into a dealership do I tell them off the bat about my bad credit?  Should I go to dealerships that advertise for bad credit customers?

(Message edited by Ronnie on July 10, 2005)

[Mdxtasy]

"Should I go to dealerships that advertise for bad credit customers?"

No.  Those are the legal loan sharks that HSG is talking about.  You're not in a pretty situation with the credit rating you have and the fact that you've only been on the job for a year.  It's going to be difficult to have somebody lend you money for a good interest rate.  A co-signer will help but that person will need a good credit rating.  By going the co-signer route, you put that other person at risk if any issues arise from your payment plan on the car.  They will go after him/her if you can't pay the loan.  

Sounds like you're working hard to make things right, good for you Ronnie.  That sort of work ethic will get you out of this rut.  Perhaps another alternative is to take that $2000 and whatever else you save up and buy a car outright so you don't have to finance anything.

[articsteve]

Before you get all stressed about a new car you should check out your personal situation regarding car insurance.  A new car will require all coverages.

It's a nasty senario for young people today.  You just might need to borrow another 3 grand and get a good used Japanese car for 5K with minimal insurance. Try a credit union.

[Craig]

In your situation, I'd look for something a little older.  There are decent used cars in the sub-$10K range.  Look at a 97-00 Civic or EL, for example.

[Sterling]

If you take your $2000 and buy a beater you are just postponing the inevitable with your credit situation. Banks don't give extra credit for buying things with cash. When the day comes to get a car loan you will be in the same position as today.

My advice would be to bite the bullet now and borrow the least amount you can get away with. Don't get hung up on the interest rate - its going to be higher than for someone with good credit. Be a good boy and pay the loan off without fail. Get your payments taken out by autodebit if you can.

"Should I go to dealerships that advertise for bad credit customers?"

Virtually every car dealership has a sub-prime credit department that deals with lenders that will consider poor credit customers. The number of people out there with poor credit is staggering. If you go to one that doesn't, you will be wasting your and their time as they won't be able to get you a loan. Keep in mind that these lenders have very stict guidelines about the year, mileage, maximum payment, maximum loan amount, etc. Only certain vehicles on the dealer's lot will meet these guidelines so you will be somewhat restricted in your choice of car. If you insist on a low payment you may be forced to look at something newer and more expensive that will allow a longer loan term and therefore, a lower payment. If you can afford it, go with a higher payment over a shorter term.

[initial_D]

A defaulted student loan would mean that it is at a Collection Agency, right? If that is the case, no bank nor CU will be lending anything to you, regardless of the amount you are asking for, unless there is someone to co-sign the loan.

Legal loan sharks will take advantage of you at this situation, don't be shocked if you get quoted with interest rates of 25%.

With $2000 on hand and bad credit, I would look at new cars, not used. There are some new car dealerships who are willing to take higher risks. Ford, GM, Hyundai, Kia, Mitsubishi. If you put $2000 down on a lease for a $20,000 new vehicle, chances are you will get it. The dealer isn't taken a big risk, if you default, they will get their car back, and $2000 is more than 6 months of payments. Some dealers are willing to do that. Mitsubishi probally is more 'motivated' than others to do business at this point, leasing an 05 Lancer isn't a bad idea. Like Sterling said, you have to start making monthly payments NOW to rebuild your credit. By the time the lease is done, you will have more options for sure.

[ronnie]

Thanks for all the advice guys.  I might hold off getting a car for a couple of months, get a second job and save up for a older Honda that I can pay in full, like a '96.

Knowing that I'm going to get screwed over with insurance too makes the matter all the more depressing. Damn... anyways, thanks again!

[AVToller]

"Be a good boy and pay the loan off without fail. Get your payments taken out by autodebit if you can."

Ah Sterling, that's Ronnie as in Veronica.

[safristi]

She's in "Accounts Receivable"..now thats Morissette!!!!!

[Sterling]

Ah Sterling, that's Ronnie as in Veronica.

I had a junior high phys ed teacher named Veronica. Come to think of it, he did have rather delicate features ...

[safristi]

Give me "50 Sterling!!!!!??"..and "meat" me in the EQUIPMENT room........

[ronnie]

She's in "Accounts Receivable"..now thats Morissette!!!!!

Very funny!! I have a friend who's a CA and her finances are way more screwed up than mine.  All due to credit cards...

[tortoise]

When I went to the bank they initially declined to give me the loan I was looking for. This was due to my student loans/overdraft protection & VISA giving me a significant amount of "debt" (calculated as total of student loans + credit card max + overdraft maximum). After some discussions with the bank associate we secured the loan with the car and I was able to get the loan.  

My credit history wasn't very good either. I began to pay off (one of my) my student loans approximately 6 months after I was supposed to start.  This isn't as negligent as it sounds HSG.  When I graduated I had 3 students loans, a direct result of the restructuring that occurred in 2000.  It was all very confusing, and never well explained.  Ronnie, I don't know if it will help, but you can get the student loan centre to draft you a letter indicating your student loan is currently in "good standing"

[safristi]

Glad ta see ya have a "cents of hummer" ronnie!!!...that will take ya 80% of the way...if I wuz u poisionally I'd beg borrow(not steal) the loan money and pay it ALL OFF,walk,bike,carpool,bus it ta werk and you will NOT BELIEVE how good you will feel when yer debt FREE...FREE as the WIND...be inventive,debt free is the INCENTIVE......get the MINKEY OFF YER BACK ....Bon Chance......

[Craig]

I've known CAs to go bankrupt, but when they did, they lost their CA designation.

[ovr50]

A CA going bankrupt is like an P.Eng's bridge falling down - a rather large no-no. If you don't pay your dues, you can lose your CA also. When I moved from AB to BC in 1980, I paid my CA dues to both AB and BC for a while; but soon tired of paying AB dues. I ceased paying them, and AB demanded their certificate (degree) back. I "lost" it.  

Sorry, this has nothing to do with autos.