Connect with us

Bad Credit

Best Bank Accounts for Bad Credit



According to a 2017 report by the FDIC 6.5% of Americans–or 8.4 million people are “unbanked.” That means they have no bank relationship whatsoever. An additional 18.7% are considered “underbanked,” which means they have only limited bank relationships, and rely on prepaid debit cards, check cashing services, and even payday loans.

There’s a little doubt millions of people are in that situation because they have bad credit. Particularly with checking accounts, banks are reluctant to open them for people with impaired credit. If you fall into that category, and you don’t have a bank account, we’ve compiled a list of bank accounts for bad credit.

Related: 4 Options When You Can’t Open a Bank Account

At least one of them should provide the checking account services you need to transact business freely.

Overview of bank accounts for bad credit:

Bank Account Unique Features Fees Best For…
Wells Fargo Opportunity Checking “My Spending Report with Budget Watch” for better financial management, plus a savings account $10 per month, but waived with $500 direct deposits, $1,500 min. average balance, or 10+ debit card transactions Full service checking account features and benefits
GoBank Checking “Budget & Fortune Teller” helps you manage your finances, plus a savings account $8.95 per month, waived with $500 or more in monthly direct deposits Large ATM network
Radius Bank Essential Checking “Financial Dashboard” enables you to track and analyze your activity, as well as link external accounts $9.00 per month, with no provision for waiver Managing your entire financial life on one app
BBVA Compass Bank Easy Checking Upgrade to a standard account after just 12 months $13.95 per month, with no provision for waiver Upgrading to a standard account quickly
NetBank Second Chance Checking Make cash deposits at thousands of participating retailers $6.95 per month with direct deposit, otherwise $8.95 Attractive trade-up checking accounts

Best Bank Accounts for Bad Credit

Wells Fargo Opportunity Checking – Best for Full Service Checking Features and Benefits

As one of the biggest banks in the country, Wells Fargo is available in most states. There’s also the advantage of having a checking account with such a well-known bank, especially when you have bad credit. They offer their Opportunity Checking account for customers who are unable to open a standard account due either to past credit problems or an unsatisfactory banking history.


Opportunity Checking comes with a wide variety of features and benefits, making the account comparable to an account for someone with good credit.

Those features include:

  • Minimum initial deposit of $25
  • Online banking with Bill Pay
  • Mobile banking, with mobile alerts warning you of suspicious activity, low balances, and payment due dates
  • Platinum debit card, with Zero Liability Protection against unauthorized charges
  • Access to over 13,000 ATMs and 5,700 bank branches
  • You can open an Opportunity Savings account to provide overdraft protection

One of the more interesting features offered on the checking account is the My Spending Report with Budget Watch that’s made to order for anyone with bad credit. It enables you to track your spending, which will give you greater control over it. That can help you avoid some of the situations that contribute to bad credit.


Opportunity Checking Comes with a monthly service fee of $10. However, you can avoid the fee with one of the following in each service period:

  • Maintain a minimum daily balance of $1,500
  • Have one or more qualifying direct deposits totaling at least $500
  • Have 10 or more posted debit card purchases or payments

Other significant fees include $35 for overdraft and returned items, $2.50 per withdrawal at non-Wells Fargo ATMs, and $31 for a stop payment.


  • The minimum initial deposit required is very reasonable at just $25
  • The monthly service fee can be waived with one of three options
  • Both online and mobile banking are included
  • The My Spending Report with Budget Watch can help you better manage your finances
  • You can set up a savings account to provide overdraft protection


  • Wells Fargo isn’t available in all states
  • The monthly service fee applies if you can’t meet one of the three criteria to have it waived
  • There’s a 3% international debit card purchase transaction fee

Bottom Line

The Wells Fargo Opportunity Checking account gives customers with bad credit histories all the typical features and benefits associated with a standard checking account. The My Spending Report with Budget Watch can help you get better control of your finances, while the addition of an Opportunity Savings account can enable you to begin saving money, so you’ll rely less on credit. Overall, it’s an excellent package for a person with bad credit to begin rebuilding.

Related: The Best Credit Cards for Poor Credit

GoBank Online Checking – Best for Large ATM Network

GoBank Online Checking is an online checking account provided by Green Dot Bank. It’s an online bank, so there are no brick-and-mortar branches. But it’s one of the very best accounts for bad credit, since your application won’t be denied for either bad credit or negative bank information revealed through ChexSystems. The account provides everything you’ll need in a checking account. And even though it’s an online bank, the funds in your account are fully FDIC insured.


GoBank Online Checking comes with all the services you’d expect from a checking account. Those features include:

  • Minimum initial deposit of $0 online, or $20 with a GoBank starter kit
  • Online banking with Bill Pay
  • Mobile banking, with mobile check deposits and account alerts
  • Debit MasterCard or Visa Debit Card, with Zero Liability Protection against unauthorized charges
  • Send and receive money to individuals with either a GoBank account or PayPal
  • Paper checks are available, which is unusual with online banks
  • Access to over 42,000 in-network ATMs
  • Deposit cash into your account at more than 100,000 retailers
  • You can open a Money Vault savings account

An interesting feature is the Budget & Fortune Teller app. It enables you to set up a budget to track both your income and expenses. It even allows you to set up budget reminders, while the Fortune Teller feature gives you guidance based on your budget.

Related10 Online Budget Tools


GoBank Online Checking has a monthly fee of $8.95. But it can be waived with direct deposits of at least $500 per month, from either payroll or government benefits.

There are no fees for either overdraft or non-sufficient funds (NSFs). However, there is a 3% foreign transaction fee, as well as $2.50 to use a non-network ATM. Also, if you deposit cash through a retailer, there is a fee of up to $4.95 per deposit.


  • Access to a huge ATM network, as well as the ability to deposit cash through more than 100,000 retailers
  • Account comes with paper checks, which is not typical for online only bank accounts
  • No overdraft or penalty fees for NSFs
  • The Budget & Fortune Teller can help you better manage your finances
  • A savings account feature is offered


  • No bank branches
  • ATM withdrawal limit is $500 per day
  • Personal check deposits are limited to $500, or $1,000 per day
  • Joint accounts aren’t offered
  • 3% foreign transaction fee
  • There’s a fee of up to $4.95 per deposit if deposit is made through a retailer

Bottom Line

GoBank Checking provides all the features of a full service checking account even for those with bad credit. It’s also critical that they don’t check your previous banking history. The biggest reason people are declined for bank accounts is because of unsatisfactory banking relationships in the past. The Budget & Fortune Teller will help you to better manage your finances, while the savings account feature will enable you to begin building a financial cushion.

Radius Bank Essential Checking – Best for Managing Your Entire Financial Life

Radius Bank Essential Checking is designed for customers who don’t have a perfect banking record. Not only does it offer a full service checking account, but it also helps you to manage your money using powerful technology.


Radius Bank Essential Checking comes with the following features:

  • Minimum initial deposit, $10
  • Online banking with Bill Pay
  • Mobile banking with mobile check deposits
  • Comes with paper checks
  • Daily debit card limit of $500
  • Pay family and friends with Venmo
  • Add Apple Pay, Google Pay and Samsung Pay to your debit card
  • After 12 months of positive banking history, you may be eligible to upgrade to a Rewards Checking account

The Financial Dashboard feature enables you to 1) build a budget and track spending, 2) analyze trends, 3) link external accounts, and 4) monitor your net worth.


The account has a $9 monthly service charge and does not offer a waiver provision.


  • Offers paper checks, which is uncommon for online banks
  • Mobile Wallet for your debit card – Apple Pay, Google Pay and Samsung Pay
  • Financial Dashboard enables you to link and monitor external accounts
  • Upgrade to Rewards Checking after only 12 months


  • No bank branches
  • No monthly service fee waiver provided

Bottom Line

The Radius Bank Essential Checking Financial Dashboard enables you to manage your entire financial life on the banking app. That will help you get better control of your finances, which should help to improve your credit. You can also trade up to Rewards Checking after just 12 months.

Related: How To Get Your REAL Credit Score

BBVA Compass Bank Easy Checking – Best for Trading up to a Standard Account Quickly

BBVA Compass Bank Easy Checking is designed for specifically for consumers who are unable to open a standard account. They recommend you first apply for the standard Free Checking account, and you’ll be offered Easy Checking if you don’t qualify.


BBVA Compass Bank Easy Checking comes with the following features:

  • $25 to open your account
  • Online banking with Bill Pay
  • Mobile banking with mobile check deposits
  • Visa Debit Card, with cash back rewards on select purchases
  • Unlimited check writing

Perhaps the biggest feature of the BBVA Compass Bank Easy Checking Account is that it comes with an opportunity to upgrade to a standard checking account after just 12 months. To qualify for the upgrade, your Easy Checking account must still be in active status, and have a positive balance. And though they don’t say it, you probably shouldn’t have any overdrafts in your account.


The account comes with a monthly service charge of $13.95. Unfortunately, there’s no provision for the fee to be waived.

BBVA Compass Bank Easy Checking also has the following fees:

  • NSFs – $32
  • Deposited item returned – $15
  • Out of network ATM fee – $3 plus fee charged by hosting institution
  • 3% international transaction fee
  • Early account closure fee – $25 if closed within 180 days of opening


  • Unlimited check writing
  • Availability of savings accounts to avoid overdrafts
  • Cash back rewards on select Visa Debit Card purchases


  • High monthly service fee
  • No monthly service fee waiver provision
  • Easy Checking is available in only seven states: Alabama, Arizona, California, Colorado, Florida, New Mexico, in Texas
  • 3% international transaction fee

Bottom Line

Despite the relatively high fees on this account, it’s well worth having since it gives you an option to trade up to a standard account after just 12 months.

NetBank – Best for Attractive Trade-up Checking Accounts

Offered by Axos Bank, NetBank Second Chance Checking is specifically for people who are in the ChexSystem and unable to open a regular checking account.


As the name implies, NetBank is a fully online banking platform, and therefore has no local branches. However, it does offer full service checking with the following features:

  • Minimum opening deposit of $50
  • Free Visa Debit Card
  • Overdraft protection available
  • Online Banking with Online Bill Pay
  • Mobile Banking with mobile check deposits
  • Deposit cash with Green Dot Reload at participating retailers
  • Account monitored for potential fraud

One of the major benefits of NetBank Second Chance Checking is that once you improve your credit and establish your banking relationship, the bank has a number of excellent checking account options. For example, their Rewards Checking pays interest up to 1.25% APY, while their CashBack Checking pays you 1% cash back on all transactions that require a signature. And neither account has a monthly service fee.


The monthly service fee is $6.95 with direct deposit. If you don’t have direct deposit, the fee increases to $8.95 per month.


  • Ability to add cash to your account through participating retailers
  • Excellent checking account options when you improve your credit


  • No local bank branches
  • $4.95 fee to reload your account at Green Dot Reload retailers
  • No paper checks

Bottom Line

NetBank Second Chance Checking is an excellent bank account for bad credit, especially since they don’t even check the ChexSystem. And once you build a solid relationship with the bank, and improve your credit a bit, you can trade up to other checking accounts that have both serious benefits and low fees.

What is a Bank Account for Bad Credit?

It’s an account for anyone who can’t qualify for a standard bank account. This can certainly include anyone who has bad credit, particularly if there’s a major derogatory event, such as a bankruptcy.

But an even bigger problem is a history of one or more unsatisfactory banking relationships. Several times in this review I’ve mentioned a service called ChexSystems, which is something like a credit reporting database for banks. The main difference is that it reports specific activity connected to previous bank accounts. For example, it keeps track of bank customers with a long history of bounced checks, or who have accounts that have been closed with unpaid negative balances.

Banks will access ChexSystems before opening any new accounts. If you have negative information in your report, you will not be permitted to open a standard account. Should that be the case, bank accounts for bad credit will be your only option.

Why You Need a Bank Account for Bad Credit

In a world where money has gone full-on electronic, you need to have a bank relationship. It will make it easier to pay bills, deposit checks, accept payments of all types, transact business with online and point-of-sale businesses, and access cash.

What’s more, having a bank account is much cheaper than using alternative financial services. For example, common non-bank financial services include:

  • Prepaid cards, which have high fees and limited usability
  • Money orders, which have high fees and aren’t accepted everywhere
  • Check cashing services, which are the most expensive option for managing your income

Simply having a bank checking account can save you hundreds of dollars per year over these services, as well as enable you to transact business freely.

Improve Your Credit Score

You can take some steps to improve your score. Paying your bills on time, keeping credit card balances low, and leaving older accounts open will help raise your score.

Ready to increase your score now? Experian Boost™ can help raise your FICO score with every utility and mobile phone bill you pay on time. Until now, those payments did not positively impact your score. Start now for free.

Read More: Experian Boost Review

Bottom Line

If you’ve been going without a bank account because you have bad credit, you now know you have alternatives. Even if you can’t qualify for a standard bank account, bank accounts for bad credit offer most of the same services.

Choosing any one of the above bank accounts will not only make your financial life easier, but it will also save you money in the process.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

What is a subprime credit score?



A subprime credit score can affect your ability to obtain financing for student loans, personal loans, or a new credit card. (iStock)

If your goal is to get approved for a new loan or life of credit, your credit score is one of the most powerful tools that you have at your disposal. After all, the score you’re given can determine the types of loans you’ll be deemed eligible for and the corresponding interest rates you’ll be given if you’re ultimately approved. 

Most people are aware their score rated on a scale from poor to excellent by the credit bureaus. However, they may not be aware that another designation also exists: prime credit score and subprime credit score.

Below is a closer look at subprime credit scores. It will cover what this designation means, how having a subprime credit score will impact you, and how to improve your credit score to be given better rates. Keep reading to learn more.

What is a subprime and prime credit score?

In truth, every lender uses a slightly different scoring model, so it can be hard to give specifics on exactly what will count as a subprime score. However, as a rule of thumb, any FICO score that falls below the “Good,” “Very Good” or “Excellent” score range is likely to be considered a subprime score.

As a refresher, here is how FICO, defines their scoring model: 

800 – 850: Excellent

740 – 799: Very Good

670 -739:  Good

580 – 699: Fair

Below 580: Poor (bad credit)

Separately, those in the market for a home loan can get personalized rates using a mortgage broker like Credible without affecting their credit score.


How does a subprime credit score impact me?

Put simply, having a subprime credit score can affect your ability to obtain financing for student loans, personal loans or a new credit card. Since lenders view your credit score as an assessment of the level of risk associated with lending to you, they may want extra reassurance that they’ll receive payment. 

If you have a subprime score, you may have to take certain extra steps to be approved for a loan, such as applying with a co-signer. It’s also unlikely that you’ll have access to the same rewards and benefit options as someone with a prime credit score. Subprime borrowers are rarely deemed eligible for 0% APR credit cards, for example.

If you’re in the market for a new card, you can use Credible to see what loan amounts are available to borrowers with your score.


That said, even if you do get approved for the new loan or credit card, a subprime score will almost guarantee that you’ll end up paying higher interest rates than someone who has a better score. In addition, some financing products aimed at subprime borrowers also come with additional fees like monthly service fees or a higher annual fee. 

How do I improve my subprime credit score?

If you are finding that you’re having a hard time being approved for financing or that you’re being charged high-interest rates, the best thing you can do is to take steps to boost your credit score. Below are a few tips that you can use to launch your credit score into the prime range.

Make your payments on time

Remembering to make your credit card or loan payment on time is one of the best things that you can do to improve your credit history. In total, loan payment history accounts for 30% of your overall score — so, it’s important to avoid late payment of any kind. If you have trouble remembering to make your payments each month, you can set up automatic payments with your lenders. Alternatively, most credit card issuers offer the option to be sent loan payment reminders over email. 


Keep your credit utilization rate low 

Your credit utilization rate is another important factor in determining your credit score. This ratio accounts for an additional 30% of your score and it measures your current balances against your total amount of available credit. Generally, you should strive to keep this ratio as low as possible by paying down any existing debts and being careful about any new charges. Ideally, this ratio should be below 30%.

Refrain from filling out too many applications at once 

Finally, 10% of your credit score is determined by the number of recent inquiries you have on your credit reports. Every time, you apply for a new type of financing, the lender will generally do what’s known as a “hard pull” on your credit, which will mark a hard inquiry on your credit reports. If you have too many inquiries at once, it can hurt your score, which is why it’s important to avoid filling out too many applications at the same time.


The bottom line 

If you have a subprime credit score and you need financing, your best bet is to shop around for a loan. Since every lender uses a slightly different scoring model, you may find that you’re offered a better rate with one lender as opposed to another.

Those shopping around for rates may benefit from visiting an online marketplace like Credible where they can explore personal loan rates and lenders from the comfort of home. 

Source link

Continue Reading

Bad Credit

What Is Considered an Excellent Credit Score?



The content on this page is accurate as of the posting date; however,
some of the offers mentioned may have expired.

Do you have an excellent credit score? A lot of people can achieve good credit scores by practicing responsible financial habits, such as making on-time payments, but it takes a little extra knowledge — and some credit card savvy — to take your credit score from good to excellent.

Is having excellent credit worth it? Absolutely. Credit scores make up a huge part of our financial lives, so it’s to your advantage to learn how to get your credit score as high as possible—and getting an excellent credit score is just about as high as you can go.

How do you know if you have excellent credit? What is an excellent credit score and is there an easy way to get it? Let’s take a closer look at what is considered an excellent credit score, as well as what you can do to boost your credit score into the excellent range.

What is an excellent credit score?

According to the FICO credit scoring model, an excellent credit score falls between 800 and 850 points. FICO, or the Fair Isaac Corporation, operates one of the most popular credit scoring systems in the industry, and reports that over 90 percent of top lenders use FICO credit scores to help them make lending decisions.

If your credit score falls within the excellent credit score range, your credit is as good as it gets. Yes, you could try to achieve a perfect credit score, but you don’t need to actively work on building your credit the way you might if you had fair credit or bad credit. Instead, you can focus on maintaining your excellent credit score by practicing the responsible credit habits that helped you earn your score in the first place, like paying your bills on time and keeping your balances low.

What are the credit score ranges?

What is an excellent credit score range? How does it compare to the other credit score ranges? Here’s a breakdown of the five FICO credit score ranges, including the points that fall within each range:

FICO Credit Score Ranges

Excellent/Exceptional 800-850
Very Good 740-799
Good 670-739
Fair 580-669
Poor 350-579

The FICO scoring system occasionally refers to the top credit score range as “Exceptional” — but don’t worry, that means the same thing as “Excellent.” If you have excellent credit, you don’t need to do anything else to get exceptional credit. You’re already there!

What are the factors that impact your credit score?

The FICO credit scoring model uses five factors to determine your credit score: payment history, credit utilization, credit history, credit mix and recent credit applications. Let’s take a closer look at how each of those factors impacts your credit score:

Payment history (35 percent)

This is your history of on-time payments. If you have excellent credit, you’re probably very good at making on-time payments — but if you ever accidentally miss a credit card payment, act quickly to keep it from affecting your credit score. Making on-time payments consistently is one of the best ways to maintain a stellar credit.

Credit utilization (30 percent)

Your credit utilization ratio is the amount of credit you’re currently using compared to the amount of credit available to you. If you have excellent credit, you probably have a lot of available credit because you keep your balances low or pay them off in full every month. That’s great for your credit score. Keeping a low credit utilization — below 30 percent at least, but ideally within single digits — is another surefire way to keep a strong credit standing.

Credit history (15 percent)

This is the age of your open credit accounts. If you’ve been successfully maintaining credit accounts for a long time, your credit score is likely to get a boost. This is one of the reasons why it’s a good idea to keep old credit cards open even when you are no longer using them regularly.

Credit mix (10 percent)

Your credit mix is based on the different types of credit accounts under your name. If you have both revolving credit (like credit cards) and installment loans (like a car loan), your credit score could go up.

Credit applications (10 percent)

Your credit score is also impacted by your recent credit applications. If you apply for a lot of credit all at once, lenders might wonder if you are planning on going into a lot of debt — and whether you’ll be able to pay off that debt in the future. This is why hard credit inquiries, which occur every time you apply for a new credit card or loan, can prompt a temporary drop in your credit score.

Steps to improve your credit score

If you want to learn how to get an excellent credit score — or if you already have excellent credit and want to work toward that perfect 850 — here are some steps you can take to improve your credit score.

Start by making on-time payments every month, if you aren’t doing so already. Since 35 percent of your credit score is based on your payment history, making on-time payments is one of the best things you can do to boost your credit score.

Next, start paying down your balances. The lower you can get those balances, the more available credit you’ll have — which is good for your credit utilization ratio and even better for your credit score. As the Washington Post reports, people with perfect credit scores have an average credit utilization rate of 4.1 percent. That doesn’t mean they never use more than that much of their available credit; it just means that they pay those balances off every month, and keep any revolving balances very low.

You can also increase your available credit by requesting a credit limit increase or applying for a new credit card. If your credit already falls in the Very Good range (740-799), going online and requesting a credit limit increase on one of your existing credit cards might give you the point boost you need to take you over 800.

Lastly, you’ll want to track your credit score on a regular basis — here is our advice on how to get a free credit score — and review your credit reports to ensure that all of the information is accurate and up-to-date. Understanding how your credit score fluctuates based on your outstanding balances, new credit applications and overall credit history can help you make adjustments that will benefit your credit score both now and in the long run.

Benefits of having excellent credit

There are numerous financial benefits of having excellent credit. When you have excellent credit, you can access the best credit cards on the market — including the top travel credit cards, the best cash-back credit cards, the best credit cards for dining out and more. Your excellent credit score will make you an ideal candidate for luxury credit cards like the Chase Sapphire Reserve® card or The Platinum Card® from American Express.

Excellent credit score credit cards generally offer lower interest rates, thanks to your strong credit history. When lenders trust you to pay back your debt promptly and responsibly, they have less of an incentive to charge high interest rates — which means you can expect to receive lower interest rates not only on your credit cards, but also on auto loans, personal loans and mortgages.

Plus, your excellent credit will never stand in the way of your ability to rent an apartment, open utility accounts or — if your employer checks credit before hiring — get a job.

Source link

Continue Reading

Bad Credit

Used Vehicles and Bad Credit Borrowers: Smart Car Shopping



When you’ve got less than perfect credit, going for a used car is a smarter decision than seeking that brand-new vehicle. Not to mention, used cars are becoming the preferred choice for borrowers across the credit score spectrum.

Used Cars Becoming More Popular

Used Cars and Bad Credit Borrowers: Smart ShoppingYou don’t have to settle for the clunker in the back of a used vehicle lot – but now may not be the time to finance the most expensive car, either. When you’re struggling with poor credit, reliability and good loan terms should be at the front of your mind.

More specifically, you should choose a reliable vehicle that’s going to last, and one that you can comfortably afford each month without breaking the bank. It seems obvious, everyone wants a reliable car! But one of the main goals you should focus on with your bad credit auto loan is repairing your credit for future purchases.

Not only does having a high credit score improve your chances of getting approved for new credit later, it can also save you money. Having a good credit score means a higher chance of qualifying for the lowest interest rates and the best car loan deals offered.

However, you have to start somewhere. And a reliable used vehicle with a bad credit auto loan could be the ticket.

Recently, even good credit borrowers are increasingly going for used cars. The data shows used vehicle purchases are on the rise across all credit scores. While everyone was locked indoors during statewide shutdowns due to COVID-19, dealers began shifting their focus from new cars to used ones, and they’ve started showcasing their certified pre-owned vehicles.

Worried About Getting a Used Vehicle? Try a CPO Car

If a used car seems risky to you, check out a certified pre-owned (CPO) vehicle. A CPO auto loan can be seen as the middle ground between new and used, and it can be a good option for borrowers who want a newer car without the hefty price tag.

CPO vehicles are inspected by a manufacturer-certified mechanic, cleaned, and come with some type of warranty. Many CPO cars are also just coming off-lease, and usually have lower mileage. Since a CPO’s selling price is generally cheaper than financing a brand-new one, borrowers who are looking for reliability are starting to turn toward the certified option for the most bang for their buck.

If you work with a bad credit auto lender (or subprime lender) and you qualify for financing, you may be able to get into a CPO vehicle. Subprime lenders operate through a dealership’s special finance department, so bad credit borrowers who meet the requirements could qualify.

In general, CPOs tend to be more expensive than regular used cars, since they come with more perks. If you don’t quite meet the requirements of a CPO vehicle, opting for a used car is still a smarter financial choice for borrowers with questionable credit scores.

Subprime Lenders and Improved Approval Chances

When you apply with a bad credit auto lender, they determine what monthly payment you qualify for based on your individual information. This is done by looking at many aspects of your credit and financial life: credit history, income, living situation, expenses, overall stability as a borrower, and more.

Once the subprime lenders determine how much vehicle you can afford, they tell the dealer. You then work together to find a car that fits the monthly payment you qualify for. Getting your monthly payment to a lower amount can be easy if you simply extend the loan term, but you should choose a used vehicle that’s reliable, while keeping your loan term as short as you can.

After you narrow down some car choices, you’re going to need a down payment. This can vary, but subprime lenders typically require borrowers to have at least $1,000 or 10% of the vehicle’s selling price. The more expensive the car, chances are, the more you’re going to have to put down to get into that vehicle. Poor credit borrowers are usually required to put money down to prove to the lender that they’ve got skin in the game, and down payments improve your chances of getting approved.

Meeting the down payment requirement gets easier when you go for a cheaper car – another reason why many bad credit borrowers opt for used vehicles. On top of all this, bad credit borrowers are more likely to get approved for used cars anyway, due to the lower sticker price.

Repairing Your Credit With an Auto Loan

If you work with a subprime lender, the auto loan itself could give you the chance to repair your credit. Subprime car loans are reported to the credit agencies, and with on-time payments, you can rebuild your credit. However, if you go for a long auto loan or one with high payments, you could be putting yourself in the hot seat, and risk damaging your credit.

Since borrowers with lower credit scores don’t normally qualify for the lowest interest rates, you could also end up paying more for that expensive new vehicle than what it’s actually worth.

Car loans almost always use simple interest, which means the charges stack up daily. The more you owe and the longer you owe, the more you pay in interest charges. Some bad credit borrowers find themselves with double-digit interest rates, which can end up being very expensive on a loan for a new vehicle.

Additionally, due to the higher selling price of new cars, many borrowers find themselves stretching their auto loan terms to the max, taking out 84-month loans, or sometimes higher, just to afford the monthly payment. Again, long loan terms can spell disaster for a bad credit borrower who’s more likely to only qualify for a high interest rate.

Not to mention, who wants to be stuck with a monthly payment for eight or more years for the same vehicle? Shorter loan terms save you more in interest charges, and a cheaper car means a lower monthly payment, too.

Ready to Find Your Next Used Vehicle?

Overall, a bad credit borrower needs to choose a sensible vehicle that’s reasonably priced, and go for auto loan terms that they can afford long term. Car loans are big commitments, often between five to sometimes eight years long. If you go for a new vehicle with a high monthly payment that rides the edge of your budget, you could end up damaging your credit if something happens. Focus on repairing your credit now, so you can save more cash and qualify for better deals later. Credit repair is a long-term game – play wisely!

If you’re ready to get into your next auto loan, start your car shopping journey right now with Auto Credit Express. We’ve got a nationwide network of dealerships with special finance departments that are equipped to work with bad credit borrowers. To get matched to a dealer in your local area at no cost, complete our auto loan request form.

Source link

Continue Reading