Auto Loan options for a low credit score applicant (565 based on creditkarma.com)

[lotharmataos]

Hey guys, I just graduated from college and for the past 4 years I could not work so I let my 4 credit cards ($6000 total) go to collection and they brought my credit score down to 564. As of now, I do not have a car and I am looking to buy one that will cost about 30k. I have $ 3500 that I am willing to put down and my annual income will be 65k based salary. I am looking forward to start settling all my account in colection but meanwhile I want to have a nice ride. what do you think are my options and do you think I can talk to a banker and lower my interest ?

[JamesKnox]

Hey!

Congrats on graduating. 

Let me ask you this, are you opposed to taking the 3500 and paying off more than half of your CC debt and working to pay the remaining balance and THEN go apply for car loan? That way you could get at least a decent rate so you don't end up paying 40k+ for a 30k car. 

I'm just thinking if you have a decent mode of transportation right now, to start working on paying off collections and hopefully getting them to DELETE the collections from your report would really do wonders for you as you enter the next phase of your life. 

[JamesKnox]

By the way..I hate when you ask a question and someone responds but doesn't even answer your question and just gives their advice and I just realized that I just done that!

SO to answer your question...

Do you currently belong to a credit union? If not, and you belong to a bank like BofA, Chase, Citi, etc...maybe you could switch to local credit union and then apply for car loan through them! They are probably going to be MUCH more lax on your current situation if they see you are actively rebuilding AND you do your banking with them. 

[TrishN]

your income will be 65k for year. are you saying that you dont have a prove that you making 65k for year right now? its hard for you to get a 30K car loan with 3k5 down payment. Some lender may will take a risk,but you have to prove income and put 20% and up for down payment, about interest rate i bet in your situation no way you can get less than 17% .

this is last option for you

keep that 3k5 and look for any car you can pay by cash,

send CA PFD to remove tradeline out of your CR, if they dont do PFD you can pay them and keep send GW

go to the bank try to open 2 sucured CC

wait for 6 month with some more $ then you have better chance

sleeping time

[boomhower]

If you go to a dealer with the DP you will get financed but it will be at an ugly ugly rate and you are going to pay dearly for that new car.  The sounds financial decision would be to take that $3500 and buy a used car.  Drive that until the collections fall off and then get a nicer car.  Consider it your penalty for using CC's in college.  If a $3500 is just impossible for you to live get the absolute cheapest car you can.  You just graduated college, you do not need a $30k car.  Get something cheap.  You should have other priorities right now.  You need to build up your savings.  You need a rainy day fund incase you lose your job.  If you have student loans you can start accellerated pay off of those.  You need to start making smart financial decisions do you don't end up with other dings on your credit.  A 30k car shouldn't be on the forefront of things to do right now.

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@JamesKnox wrote:

Hey!

Congrats on graduating. 

Let me ask you this, are you opposed to taking the 3500 and paying off more than half of your CC debt and working to pay the remaining balance and THEN go apply for car loan? That way you could get at least a decent rate so you don't end up paying 40k+ for a 30k car. 

I'm just thinking if you have a decent mode of transportation right now, to start working on paying off collections and hopefully getting them to DELETE the collections from your report would really do wonders for you as you enter the next phase of your life. 

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That won't accomplish anything.  They are still going to show as collections and hurt just as bad paid as they do unpaid.  Getting them deleted is far from a done deal and it's actually more difficult to get them off once paid than they are unpaid. 

[JamesKnox]

boomhower,

I totally disagree. To get collections deleted won't accomplish anything? 

I did not say just PAY them I said specifically to see if you can get them to delete; which you can actually ask prior to paying. 

So I still believe...call collection agencies..if you can get them all to PFD....then PAY THEM, get collections deleted and then apply for car loan. 

[StartingOver10]

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@boomhower wrote:

If you go to a dealer with the DP you will get financed but it will be at an ugly ugly rate and you are going to pay dearly for that new car.  The sounds financial decision would be to take that $3500 and buy a used car.  Drive that until the collections fall off and then get a nicer car.  Consider it your penalty for using CC's in college.  If a $3500 is just impossible for you to live get the absolute cheapest car you can.  You just graduated college, you do not need a $30k car.  Get something cheap.  You should have other priorities right now.  You need to build up your savings.  You need a rainy day fund incase you lose your job.  If you have student loans you can start accellerated pay off of those.  You need to start making smart financial decisions do you don't end up with other dings on your credit.  A 30k car shouldn't be on the forefront of things to do right now.

---

@JamesKnox wrote:

Hey!

Congrats on graduating. 

Let me ask you this, are you opposed to taking the 3500 and paying off more than half of your CC debt and working to pay the remaining balance and THEN go apply for car loan? That way you could get at least a decent rate so you don't end up paying 40k+ for a 30k car. 

I'm just thinking if you have a decent mode of transportation right now, to start working on paying off collections and hopefully getting them to DELETE the collections from your report would really do wonders for you as you enter the next phase of your life. 

---

That won't accomplish anything.  They are still going to show as collections and hurt just as bad paid as they do unpaid.  Getting them deleted is far from a done deal and it's actually more difficult to get them off once paid than they are unpaid. 

---

I totally agree with boomhower above. The OP didn't follow through in collage, charged up his cards and then let them all go to collections rather than get a part time job to make payments while in collage.

We all make mistakes, but the OP won't learn anything if he doesn't learn to actually fix what he chose to do while in collage. $65k sounds like a lot to a recent collage graduate. He needs to get out into the world to learn it isn't really enough to do what he wants to do and it starts by learning that a $30k+ vehicle is out of his price range.

If the OP takes a little bit of time, he can get rid of the collections through many methods including PFD, but he needs to do that before he commits to a high interest rate vehicle loan for 5 years and then isn't able to make that payment either. Slow down just a little bit OP and get your credit in order before you go out and make a large purchase at a high interest rate. Good luck.