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4 Ways Bad Credit Affects Your Auto Loan

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Bad credit can affect your auto loan in many different ways. Here are four ways bad credit can affect your next car loan, and some workarounds that could help.

1. May Not Qualify on Your Own

As a bad credit borrower, you may find lenders to be a little wary of rolling out the red carpet on an auto loan. While there’s no minimum standard credit score that gets you approved or denied for financing, the better your credit score, the more likely you can handle yourself when it comes to repaying a car loan. If a lender is on the fence about your credit score they might not approve you on your own. Sometimes they require you to bring in the help of someone with a better credit score.4 Ways Bad Credit Affects Your Auto Loan

Solution: Get a cosigner

Getting a cosigner could be the solution to your car buying blues when you have a low credit score. A cosigner agrees to make payments on the loan if you miss them or fall behind, and also “lends” you their credit score so you can meet the lender requirements.

In order for a cosigner to be helpful, they should have a credit score better than yours, ideally around 660 or higher. A cosigner also needs to meet all the lending requirements that you do when being approved for a car loan since they have to prove they can repay it if you can’t. This gives a lender peace of mind and may increase your odds of getting an auto loan with poor credit.

2. May Qualify for Higher Interest Rates

One of the bigger bummers when it comes to car loans is that the lower your credit score is, the higher the interest rate you’re likely to be assigned. This means that bad credit makes auto loans more expensive (interest is the cost of borrowing the money). The interest rate you qualify for is influenced mainly by your credit score.

Solution: Larger down payment

Fortunately, you can offset the cost of higher interest rates by borrowing less to begin with. The more money you can bring in as a down payment, either in cash, trade-in equity, or a combination of both, the more likely you are to pay less on your loan overall. Depending on how much money you can pay upfront, you may even be able to knock your loan down low enough to qualify for a lower interest rate.

3. May Have Fewer Vehicles to Choose From

The bad credit borrowing process with subprime lenders typically means getting approved for financing first before you choose a car. It’s almost the opposite of the process for an auto loan when you have good credit and when you work with direct lenders. With good credit, you can usually pick out a vehicle from any seller and worry about financing later, since having good credit opens more financial opportunities.

Bad credit borrowers often don’t start with car choice, though. In this case, you need to find the right lenders to work with, usually through a special finance dealership. Once you’re qualified for financing, the lender sends the dealer a payment call, letting them know that you can be financed for up to a certain payment amount each month.

The dealer then chooses a selection of vehicles they have available whose price fits into your given budget. Essentially, you have to pick from dealer stock and shop within what you’re qualified for.

Solution: Try for pre-approval

Even though it may be easier to find an auto loan through a special finance dealership when you’re struggling with credit issues, preapproval with poor credit isn’t unheard of. In fact, having a long-standing account with a bank or credit union can be a good foot in the door when it comes to getting a car loan. Bad credit borrowers tend to have more luck with credit unions since they’re not-for-profit organizations that can often pass savings on to their members.

4. Impacts Loan Chance With Traditional Lenders

A preapproval with poor credit is possible in the right circumstances, but it can still be difficult to get if your credit score is worse for wear. Bad credit can definitely put a damper on your auto loan opportunities with traditional lenders such as banks, credit unions, and online lenders. Most of these financial institutions require you to have a credit score of around 660 or above to even be considered for financing.

Solution: Shop with a subprime lender.

There are lenders that are prepared to work with borrowers who are in tough credit situations, though, called subprime lenders. These lenders look at more than just your credit score to help see if you’re a good fit for an auto loan. Not all dealerships work with lenders that can finance bad credit borrowers, so it’s important to know where to turn.

Ready to Turn Your Credit Around With a Car Loan?

It can be hard to know where to turn when you’re in a bad credit situation and need an auto loan. Here at Auto Credit Express, we’ve got you covered! Simply fill out our fast, free car loan request form and get started toward your next auto loan now!

The even better news? Getting a bad credit car loan can help you build credit with each on-time payment! This means your credit score can improve over your loan term, and if you build it up enough, you may not need our help, or a bad credit car loan next time around! So what are you waiting for – get started on your next auto loan today!

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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