Auto Loans For People With Bad Credit

That car that's supposed to provide you with the freedom to get you where you want to go may also be one of the many chains tying you down to a job you'd rather ditch. That's because -- over the course of a lifetime -- the average person will spend more than three years at work just to pay for their various sets of wheels.

The folks at eBay Deals recently released a "Trading Time" calculator that lets you figure out how long you have to work to pay for various expenses. It's an eye-opener.

Over a 50-year working lifetime, the typical person will work 157 weeks to generate the cash needed to pay for his or her cars. Then, add in another 50 weeks of work to cover car insurance. Those figures are based on the weekly median gross income. Yours may be higher or lower, of course.

If that doesn't seem like a lot to you, then think about this: You work even longer to pay for your vehicles because you need to figure in taxes and the interest on your car loans. And don't forget all the time in that vehicle commuting or shuttling your kids around.

According to the Trading Time calculator, other major expenses that keep you chained to your desk may include shoes (17 weeks), phone bills (60 weeks) and even toilet paper (two weeks).

Whether you love your job, hate it or or fall somewhere in between, it's helpful to think about the things you spend money on in terms of the amount of time you have to spend working to pay for them. Only you can decide what's really worth it.

Can You Get Back Some of Your Time?

Of course you may have no choice but to drive, and in that case, you may want to look for ways to try to reduce your costs. For example, can you drive a slightly used car instead of a new one? Keep your vehicle longer? Settle for a more economical model?

Another way to cut costs is to improve your credit. With a better credit score, you will qualify for a lower interest rate, which can mean significant savings over the life of the loan. You can see your credit scores for free at Credit.com to determine whether your credit is good. Ideally, you want to review it at least a month before you plan to shop for a vehicle in order to address any issues you uncover. (Give yourself more lead time if your credit isn't great. Here's a guide to help you rebuild your credit. )

Here's an example of the savings you may achieve by boosting your credit. As of June 4, the lowest quoted rate for a $20,000 50-month auto loan with excellent credit on Credit.com is 1.99 percent. That translates into a monthly payment of $411. But for someone with poor credit, the rate jumps to 14.99 percent or a monthly payment of $540.

Auto Loans For People With Bad Credit

Car Credit Auto Group Reviews

Millions of homeowners have garnered huge savings in recent years from one simple move: refinancing their mortgages. Now, the refinancing craze has spread to an unexpected industry: car loans.

Plunging interest rates have been bad news for savers, but borrowers couldn't be happier. Mortgage rates have dropped around 3 percentage points from their levels just four years ago. That has translated into hundreds or even thousands of dollars in monthly savings on mortgages.

But the idea of refinancing a car loan never even occurs to many borrowers. After all, with many owners choosing to buy new vehicles even before their loans are paid off, it's often easier just to take advantage of financing deals from new-car dealers. Moreover, cars typically lose their value so quickly that the loans turn upside down -- meaning that the outstanding loan is more than the car is worth, making refinancing a tough proposition.

Still, the practice is growing in popularity. A recent SmartMoney article cited figures that showed auto refinancing applications have risen by about 30% from year-ago levels. Even a modest drop in interest rate can create real savings, and unlike mortgage refinancing, the costs of getting a car loan refinanced are low. That lets borrowers reach the breakeven point on a refinance easily.

Should You Do It?

If you have a car loan with a fairly high interest rate, you have nothing to lose by attempting take advantage of low rates by refinancing. Doing so could cut your monthly payment significantly.

But beware of catches and gimmicks. If you try to refinance through a dealer, don't fall for sales pitches trying to sell you unrelated products like warranty protection. Instead, emphasize your value to the dealer, not just with this transaction but with the promise of future business. That way, you'll hopefully get the best deal you possibly can.

Car Credit Auto Group Reviews

Really Bad Credit Auto Loans

General Motors will once again have its own in-house financing unit beginning Friday, when the auto giant closes on its $3.5 billion purchase of AmeriCredit (ACF). The new unit, to be renamed General Motors Financial, will allow the automaker to offer consumers more financing and leasing options, GM said in a written statement.

"This acquisition allows GM to offer an enhanced range of solutions for our customers and dealers, and establishes an important strategic capability for GM," said Chief Financial Officer Chris Liddell.

AmeriCredit shareholders voted to approve the purchase at a meeting Wednesday at the company's headquarters in Fort Worth, Texas.

Having an in-house financing arm gives GM greater control over the loan and lease deals it can offer consumers, including nonprime loans, in which AmeriCredit specializes. That greater flexibility, combined with desirable products, could help the automaker regain some of its declining share of the domestic auto market -- and aid in attracting investor interest to its planned initial public offering in November.

"When you own somebody, you can tell them what to do," Former GM CEO Edward Whitacre told The Detroit News last month. Whitacre said further that the deal would boost the automaker's public offering. "It strengthens the IPO because it shows we have a credit organization just like Ford Motor (F) and Toyota Motor (TM)."

GM Will Keep Working With GMAC/Ally

GM once owned GMAC, but sold its stake in the finance arm for $7.4 billion three years ago to raise cash. GMAC, now known as Ally Financial, still supplies loans to GM, as well as to Chrysler Group.

GM's purchase of AmeriCredit was a swift one. The all-cash transaction, which values each share of AmeriCredit at $24.50, was just announced in July. The companies have been working together since September 2009, when they began a program to offer nonprime loans, allowing GM to significantly boost sales to customers with less-than-stellar credit.

In its statement Wednesday, GM said "key partners," including Ally Financial, will continue to provide financial products, such as dealer financing and financing for prime customers.

In the second quarter, Ally financed 36% of GM's new retail sales in the U.S. and Canada, up from 28% last year, the Detroit Free Press reported. Ally also financed 86% of dealers' new-vehicle inventory at the end of June, in line with the 85% it financed a year earlier.

GM sought earlier this year to reacquire Ally, but the lender declined GM's overtures, leading to the automaker's decision to purchase AmeriCredit.

Really Bad Credit Auto Loans

Second Chance Car Loans For People With Bad Credit

Americans have set another record. It's not a good one, though.

U.S. consumer debt hit an all-time high in October, with borrowing rising by $14.2 billion over September levels, to total $2.75 trillion. But there's a little silver lining in the news: Most of the gain -- 76 percent of it -- came from auto loans and student loans. Only 24 percent reflected a rise in credit card borrowing. That's worth noting, because all debt is not equal.

The bright side
Some debt is not only good, but critical. Without the ability to take out mortgages, for example, most people couldn't afford to buy their own homes. Without student loans, many couldn't afford the educations that can help them earn more throughout their lives. Even car loans have their place.

Better still, these types of loans typically carry relatively low interest rates, at least compared with credit cards. In recent years, of course, interest rates have been near record lows, taking much of the sting out of some of these debts. Consider that the prime rate, which influences many interest rates, has recently been 3.25 percent, but was as high as 11.5 percent in 1989, 13 percent in 1984, and 20 percent in 1980.

The dark side
Then there are other kinds of debt that are more problematic. Even in our current environment of ultra-low interest rates, when a 30-year fixed-rate mortgage features rates of 3.5 percent, the average interest rate on credit cards is about 15 percent. Those mired deep in credit card debt are fighting a tough battle as they try to pay off what they owe while also paying steep sums in interest. A $20,000 debt that's charged 15 percent in interest will eat up a whopping $3,000 annually.

That's the problem with high-interest rate debt: If you don't manage to keep up with your payments, it can snowball, making a bad situation much worse.

So as you consider your overall debt picture, be mindful of taking on these other troublesome kinds of debt:

Borrowing from a 401(k) account is one way to get your hands on money that you want or need, but you can be short-changing your future. All the time that that money is out of the account, it's not growing for you.
Taking out a home equity loan can also be a regrettable move, especially if you use the money to pay off credit card debt. Yes, you can end up with lower rates and payments, but the loan might be stretched out so long that you still end up paying too much. And while credit card debt is unsecured, home equity loans are secured by... your home.
Investors with brokerage accounts can borrow money "on margin" and invest with it. The upside is that you get to invest more money overall. The downside is that you pay for the privilege, and your gains have to exceed your interest cost in order for you to come out ahead. Using margin amplifies your gains, but also your losses. At the Charles Schwab brokerage, recent margin interest rates were 8.5 percent for those with a debit balance of up to $25,000, and 8 percent for balances between $25,000 and $50,000. Considering that the average long-term return for the U.S. stock market has been around 9 percent to 10 percent, with many periods below that, investing on margin is clearly risky.

As you go through life, borrowing now and then in order to buy a home or car, go to school, fix up your house, or just buy a new TV, be smart about it. Avoid all high-interest rate debt, and pay any you have pronto. And only take on low-rate debt when it really makes sense and you can afford it.

Second Chance Car Loans For People With Bad Credit

Terrible Credit Car Loans

We all remember the subprime mortgage crisis. The financial system was thrown into chaos, and many homeowners lost their homes during these dark days.

Fortunately, the vast powers of the Federal Reserve were summoned to help stabilize the housing market, and along with it, the entire economy. The Fed worked its monetary magic, and the housing market is finally returning to normal.

However, there is another crisis brewing just under the economy's surface.

The sector this potential crisis is in isn't as large as the subprime mortgage sector, but it's still a $27 billion sector, according to Forbes magazine. In fact, Forbes reports that 1 in 4 Americans may be participants in this potential crisis.

Driving Toward a New Economic Cliff

I became aware of this potential time bomb last year. A close friend was financially destroyed by the subprime mortgage crisis. He is an investor and was overleveraged on more than a dozen investment properties. He was finally forced to declare bankruptcy to get out from under the mountain of debt.

Within a week of the bankruptcy filing, he started getting letters from companies like Wells Fargo (WFC) and General Motors (GM). While my friend was used to getting nasty letters from banks and finance companies, these letters were very different. These were not demand letters challenging his bankruptcy, threatening lawsuits or anything the least bit negative. Believe it or not, these letters were pre-approval letters for auto credit!

In fact, one financial company actually sent my bankrupt friend a check for $30,000 to be used at any participating auto dealer for the car of his choice. He took the check and bought a used BMW.

Take our free
online course on:
How to Buy a CarStart Now ?View all Courses
I couldn't believe it. Here's a bankrupt guy with a credit score in the low 400s, working a menial labor job, with automobile credit being thrown at him by several large and reputable lenders. These were not the "buy here, pay here" sharks at the corner used-car lot.

While I was happy for my friend, I was reminded strongly of the subprime mortgage crisis. Folks with really bad credit and sketchy employment were able to get mortgages that they really couldn't afford during the subprime mortgage crisis.

Now the same thing is happening with auto loans.

More from StreetAuthority:

This High-Flying Utility Stock Is Still A Strong Buy
Expect 2014 To Be Hugely Profitable For This Beaten-Down Sector
Missed Out On 2013's Hot IPO Market? These 3 Stocks Still Hold Value

The Numbers Behind the Looming Bust

I have started to see more and more advertising for this type of lending, raising the question of whether the subprime auto loan market will explode like the subprime mortgage market. I wondered, if this situation is truly a financial bubble, when will it burst -- and how can I best position myself to profit?

After asking these questions, I thought of John Paulson making $3.7 billion during the collapse of the subprime mortgage market. The thought of replicating just a tiny fraction of Paulson's success motivated me to find the answer. Here's what I discovered.

Bloomberg has reported the average loan to value, or LTV, for subprime auto loans has increased to 114.5 percent this year from 112 percent in 2010. Loan to value is a measure of the money lent as a percentage of the market value of the asset. A 114.5 percent LTV means that the auto loan is for 14.5 percent more than the actual value of the car. For comparison, the average LTV of subprime auto loans in 2008 maxed out at 121 percent.

This increase in LTV is signaling greater competition and a decrease in underwriting guidelines in the subprime auto sector. In other words, more and riskier loans are being made.

Subprime auto lender Exeter Finance, recently acquired by the Blackstone Group (BX), has reported an increase in late payments from 5 percent in 2012 to 7.8 percent this year. However, it's important to note that subprime lenders Banco Santander's (SAN) U.S. consumer unit and GM Financial have reported lower loan losses from 2010 loans than losses from loans originated in 2007 and 2008.

How to Profit If the Bubble Bursts

GM, which is heavily involved in subprime lending, has improved dramatically since its pre-bailout days. The company has posted more than $1 billion in net income in each of the past four quarters.

However, 88 percent of GM's North American consumer finance receivables are firmly in the subprime category. In fact, GM listed consumer receivables 31 or more days late at $1.1 billion, a 34 percent increase from last year. Making matters worse, auto dealers with weak financials currently owe GM nearly $1.6 billion, per Bloomberg. This is up from just $12 million, indicating a radical increase.

The question is, can GM remain profitable after the U.S. Treasury pulls completely out? Remember, the Treasury Department filed its final plan to close out its GM holdings in September.

I think GM made the mistake of placing short-term profits before long-term goals with its aggressive pursuit of highly risky subprime loans. As more and more subprime borrowers default, GM's bottom line will be hurt substantially. No company can withstand massive defaults of loans.

The technical picture shows a double top in the $41.50 range on the daily chart. I would not be surprised to see General Motors trading at $28 within the next 15 months.

Risks To Consider: Shorting any stock can be very risky due to the theoretical unlimited upside. Be sure to always use stop-loss orders and diversify when investing.

Action to Take: I like General Motors as a short if price drops below $40 on a daily close. Placing initial stops at $42 and a target price of $28 makes solid investing sense.

P.S. Are you terrible at knowing when to sell? You're not the only one. Fortunately, a former trust fund manager created a two-part blueprint that reveals when to sell... and when to buy. It's been 85 percent accurate for over four years -- and just closed out a 70 percent gain. Click here to access it now.

David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

Terrible Credit Car Loans

Second Chance Auto Loans Navy Federal

We all remember the subprime mortgage crisis. The financial system was thrown into chaos, and many homeowners lost their homes during these dark days.

Fortunately, the vast powers of the Federal Reserve were summoned to help stabilize the housing market, and along with it, the entire economy. The Fed worked its monetary magic, and the housing market is finally returning to normal.

However, there is another crisis brewing just under the economy's surface.

The sector this potential crisis is in isn't as large as the subprime mortgage sector, but it's still a $27 billion sector, according to Forbes magazine. In fact, Forbes reports that 1 in 4 Americans may be participants in this potential crisis.

Driving Toward a New Economic Cliff

I became aware of this potential time bomb last year. A close friend was financially destroyed by the subprime mortgage crisis. He is an investor and was overleveraged on more than a dozen investment properties. He was finally forced to declare bankruptcy to get out from under the mountain of debt.

Within a week of the bankruptcy filing, he started getting letters from companies like Wells Fargo (WFC) and General Motors (GM). While my friend was used to getting nasty letters from banks and finance companies, these letters were very different. These were not demand letters challenging his bankruptcy, threatening lawsuits or anything the least bit negative. Believe it or not, these letters were pre-approval letters for auto credit!

In fact, one financial company actually sent my bankrupt friend a check for $30,000 to be used at any participating auto dealer for the car of his choice. He took the check and bought a used BMW.

Take our free
online course on:
How to Buy a CarStart Now ?View all Courses
I couldn't believe it. Here's a bankrupt guy with a credit score in the low 400s, working a menial labor job, with automobile credit being thrown at him by several large and reputable lenders. These were not the "buy here, pay here" sharks at the corner used-car lot.

While I was happy for my friend, I was reminded strongly of the subprime mortgage crisis. Folks with really bad credit and sketchy employment were able to get mortgages that they really couldn't afford during the subprime mortgage crisis.

Now the same thing is happening with auto loans.

More from StreetAuthority:

This High-Flying Utility Stock Is Still A Strong Buy
Expect 2014 To Be Hugely Profitable For This Beaten-Down Sector
Missed Out On 2013's Hot IPO Market? These 3 Stocks Still Hold Value

The Numbers Behind the Looming Bust

I have started to see more and more advertising for this type of lending, raising the question of whether the subprime auto loan market will explode like the subprime mortgage market. I wondered, if this situation is truly a financial bubble, when will it burst -- and how can I best position myself to profit?

After asking these questions, I thought of John Paulson making $3.7 billion during the collapse of the subprime mortgage market. The thought of replicating just a tiny fraction of Paulson's success motivated me to find the answer. Here's what I discovered.

Bloomberg has reported the average loan to value, or LTV, for subprime auto loans has increased to 114.5 percent this year from 112 percent in 2010. Loan to value is a measure of the money lent as a percentage of the market value of the asset. A 114.5 percent LTV means that the auto loan is for 14.5 percent more than the actual value of the car. For comparison, the average LTV of subprime auto loans in 2008 maxed out at 121 percent.

This increase in LTV is signaling greater competition and a decrease in underwriting guidelines in the subprime auto sector. In other words, more and riskier loans are being made.

Subprime auto lender Exeter Finance, recently acquired by the Blackstone Group (BX), has reported an increase in late payments from 5 percent in 2012 to 7.8 percent this year. However, it's important to note that subprime lenders Banco Santander's (SAN) U.S. consumer unit and GM Financial have reported lower loan losses from 2010 loans than losses from loans originated in 2007 and 2008.

How to Profit If the Bubble Bursts

GM, which is heavily involved in subprime lending, has improved dramatically since its pre-bailout days. The company has posted more than $1 billion in net income in each of the past four quarters.

However, 88 percent of GM's North American consumer finance receivables are firmly in the subprime category. In fact, GM listed consumer receivables 31 or more days late at $1.1 billion, a 34 percent increase from last year. Making matters worse, auto dealers with weak financials currently owe GM nearly $1.6 billion, per Bloomberg. This is up from just $12 million, indicating a radical increase.

The question is, can GM remain profitable after the U.S. Treasury pulls completely out? Remember, the Treasury Department filed its final plan to close out its GM holdings in September.

I think GM made the mistake of placing short-term profits before long-term goals with its aggressive pursuit of highly risky subprime loans. As more and more subprime borrowers default, GM's bottom line will be hurt substantially. No company can withstand massive defaults of loans.

The technical picture shows a double top in the $41.50 range on the daily chart. I would not be surprised to see General Motors trading at $28 within the next 15 months.

Risks To Consider: Shorting any stock can be very risky due to the theoretical unlimited upside. Be sure to always use stop-loss orders and diversify when investing.

Action to Take: I like General Motors as a short if price drops below $40 on a daily close. Placing initial stops at $42 and a target price of $28 makes solid investing sense.

P.S. Are you terrible at knowing when to sell? You're not the only one. Fortunately, a former trust fund manager created a two-part blueprint that reveals when to sell... and when to buy. It's been 85 percent accurate for over four years -- and just closed out a 70 percent gain. Click here to access it now.

David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

Second Chance Auto Loans Navy Federal

Get A Car Loan With Bad Credit

General Motors will once again have its own in-house financing unit beginning Friday, when the auto giant closes on its $3.5 billion purchase of AmeriCredit (ACF). The new unit, to be renamed General Motors Financial, will allow the automaker to offer consumers more financing and leasing options, GM said in a written statement.

"This acquisition allows GM to offer an enhanced range of solutions for our customers and dealers, and establishes an important strategic capability for GM," said Chief Financial Officer Chris Liddell.

AmeriCredit shareholders voted to approve the purchase at a meeting Wednesday at the company's headquarters in Fort Worth, Texas.

Having an in-house financing arm gives GM greater control over the loan and lease deals it can offer consumers, including nonprime loans, in which AmeriCredit specializes. That greater flexibility, combined with desirable products, could help the automaker regain some of its declining share of the domestic auto market -- and aid in attracting investor interest to its planned initial public offering in November.

"When you own somebody, you can tell them what to do," Former GM CEO Edward Whitacre told The Detroit News last month. Whitacre said further that the deal would boost the automaker's public offering. "It strengthens the IPO because it shows we have a credit organization just like Ford Motor (F) and Toyota Motor (TM)."

GM Will Keep Working With GMAC/Ally

GM once owned GMAC, but sold its stake in the finance arm for $7.4 billion three years ago to raise cash. GMAC, now known as Ally Financial, still supplies loans to GM, as well as to Chrysler Group.

GM's purchase of AmeriCredit was a swift one. The all-cash transaction, which values each share of AmeriCredit at $24.50, was just announced in July. The companies have been working together since September 2009, when they began a program to offer nonprime loans, allowing GM to significantly boost sales to customers with less-than-stellar credit.

In its statement Wednesday, GM said "key partners," including Ally Financial, will continue to provide financial products, such as dealer financing and financing for prime customers.

In the second quarter, Ally financed 36% of GM's new retail sales in the U.S. and Canada, up from 28% last year, the Detroit Free Press reported. Ally also financed 86% of dealers' new-vehicle inventory at the end of June, in line with the 85% it financed a year earlier.

GM sought earlier this year to reacquire Ally, but the lender declined GM's overtures, leading to the automaker's decision to purchase AmeriCredit.

Get A Car Loan With Bad Credit