How to get a car loan when you have bad credit--plus, tips and resources to build and maintain excellent credit.Get the Money Girl book at http://MoneyGirlBook.com
Money Girl
345 MG How to Get a Car Loan With Bad Credit
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So, give it a try at midmobile.com/switch. $45 up from payment equivalent to $15 per month. New customers on first three-month plan only. Taxes and fees extra, speeds lower above 40 gigabytes of detail. [MUSIC] Hello podcast listeners. Welcome to another weekly edition of Money Girl. [MUSIC] I'm Laura Adams, the author of Money Girl Smart Moves to Grow Rich. Grab a copy of the paperback or ebook from your favorite bookseller. I recently received this question from Heather in Ohio. A friend of mine with Bad Credit is driving a car that was financed by her parents. She's sending the monthly payment, but the car loan is in her parents' names only. She doesn't have any credit cards or other loans right now. If she refinances the car loan in her name, will that help her build good credit? In this episode, we'll cover what you should know about how to get a car loan with Bad Credit, and who can refinance one. Plus, I'll give you tips and resources to build a great credit score fast. Whether you like the idea of being judged by your credit history or not, having poor credit always hurts your finances. It can cause you to pay sky-high interest rates for loans and credit cards, or to be declined for new credit accounts altogether. But even if you never borrow a dime, poor credit still catches up with you in other ways. For instance, insurance companies in most states use a credit-based insurance score to set rates for auto and home insurance. In fact, a study that I worked on for insurance quotes.com showed that consumers with poor credit can pay as much as double for car insurance compared to those with good credit. Yikes! Additionally, having bad marks on your credit report can cause other problems. Your application can be turned down when you want to rent an apartment, get a new job, or qualify for certain government benefits. Having Bad Credit doesn't mean that you're a bad person. It's simply an indication that you have a thin credit file or had financial troubles in the past. No matter if poor credit is the result of having little credit history, mis-managing your finances, or being saddled with circumstances beyond your control, you can improve your credit scores over time. I'll give you a great resource to help build credit at the end of the show. First, let's get back to Heather's question about her friend, who we'll call Jane. The car Jane pays for is financed by a loan in her parent's name, not hers. You can refinance a loan only when it's in your name, so that isn't an option for Jane. However, if you want to build credit, you must have credit accounts in your name and use them responsibly. Therefore, a smart move for Jane would be to purchase the car from her parents. For example, let's say the balance on the car loan is $10,000, and her parents are willing to sell it to her for that amount. Jane would get a new loan for $10,000 and pay it to her parents. They would use the money to pay off their loan and transfer the car's title to Jane. Now both the car and the loan belong to Jane. The payment she makes on the loan will be added to her credit history. If she pays them on time each month, those positive transactions will really boost her credit. But wait a minute, how can Jane get a loan with bad credit? After all, the reason her parents financed the car loan for her in the first place is probably because Jane couldn't qualify for a loan on her own. Well, here are three financing options, even when you don't have excellent credit. Option number one, credit unions. A local or national credit union can be a great source for a car loan. Credit unions are similar to banks, but they require you to be a member in order to use their services. Different credit unions have different membership requirements, such as working for a certain employer or living in a certain city. However, in some cases, joining can be as simple as making a one-time ten-dollar donation to a charity that the credit union supports. Credit unions tend to be more forgiving than traditional banks of consumers who have less than perfect credit. They're serious about serving members and may take a chance on you if you're equally serious about repaying a car loan on time. Now that we're in Q4, it's a good time to start thinking about making memories with the people you love most before the end of the year. We put a lot into the time we spend with our loved ones. So you want to extend that care, comfort, and peace of mind to what happens when you're gone. 41% of people don't have the life insurance coverage they need. Policy genius makes finding and buying life insurance a breeze. With policy genius, you can find life insurance policies at start at just $292 a year for a million dollars of coverage. And some options are 100% online and let you avoid unnecessary medical exams. 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Visit Ixcel.com/moneygirl to get the most effective learning program out there at the best price. At Credit Union of Colorado, banking doesn't have to be like this. Big national banker here, just saying we like to apologize to you for that thing we did. Was it selling your information, canceling your personal loan? Who can say? That's for the lawyers to figure out. So just no, it's not going to happen again. Until it does, again. At Credit Union of Colorado, we have better interest rates and seamless mobile banking. All while having a heart, Credit Union of Colorado. Honestly, good. Learn more at honestlygood.org, federally insured by NCUA. In addition to giving you more personalized service, Credit unions generally offer competitive interest rates that can save you money. To find a local or national credit union, visit findacredunion.com or findabetterbank.com. Option number two, find a co-signer. If you can't qualify for a car loan, consider finding someone with good credit to be your co-signer. Maybe a friend or family member trusts you enough to share responsibility for a debt. When you co-sign a loan, the payment history gets reported on both of your credit reports, even if only one co-signer makes the payments. That means if you make payments on time, it benefits both of your credit reports and helps increase both of your credit scores. On the other hand, making late payments damages both of your credit files. And if you default, the lender will hold both of you equally responsible for repaying the debt. Option number three, peer-to-peer loans. A peer-to-peer loan is when you borrow money through an online platform from an individual, instead of from a traditional financial institution. It's also known as person-to-person lending, P2P lending or social lending, and it's growing in popularity. You create a profile and post-alone listing that includes how much you want to borrow and what the money will be used for. Investors choose the opportunities that meet their criteria, and some will take a chance on borrowers with lower credit scores. In most cases, P2P loan payments get reported to National Credit Bureaus and can help you build credit. Check out Prosper and Lending Club, where you can borrow for as little as 6.73% right now. If none of these three financing options works for you, the best way to qualify for a car loan is to focus on raising your credit score. One of the easiest ways to build credit fast is to use a secure credit card. To learn more, be sure to listen to a previous podcast, which is episode number 269, called "How to Get Credit with No or Bad Credit." Also, check out a multimedia tutorial I created called "The Credit Score Survival Kit." It's a free download that includes a video, audio, and ebook that teaches you three smart and legitimate strategies to build excellent credit. Visit smartmoves2growrich.com and click the button that says "Credit Score Survival Kit." To get exclusive money tips not mentioned in the podcast, don't miss the free Money Girl newsletter. To sign up, connect on social media, or read a transcript of this show, visit quickanddirtytips.com and look for episode number 345, called "How to Get a Car Loan with Bad Credit." I'm glad you're listening to Ching. That's all for now, courtesy of Money Girl, your guide to a richer life. At Credit Union of Colorado, banking doesn't have to be like this. Big National Banker here, just saying we'd like to apologize to you for that thing we did. Was it selling your information, canceling your personal loan? Who can say? That's for the lawyers to figure out. So just know, it's not going to happen again. Until it does, again. At Credit Union of Colorado, we have better interest rates and seamless mobile banking. All while having a heart, Credit Union of Colorado. Honestly, good. Learn more at honestlygood.org, federally insured by NCUA. At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think, with Capella University. Learn more at Capella.edu.