08-25-2012 09:58 AM
I applied for a small ($10k) auto loan through my credit union and was approved, but only with a co-signer. They offered 16%, $0 down, 60 months. Their reason was because I currently have an unsecured personal loan ($1500, about $600 left) with them and no auto history (previous positive loan has fallen off my report). I requested a statement from my previous lender as proof of the loan but I don't know if I'll get it from them and if it would even do any good.
Applied with Cap 1 after receiving numerous pre-approved offers and was denied. Reasons for denial were judgement/lien (BK 10/05) and, this is the one that confuses me, credit limits too low. Now, I know many, many people have been approved by them with a BK on their record, and that second one just seems silly so I was thinking of asking for recon BUT when I call the number on the denial letter I can't get a human that knows anything or has any authority to discuss the denial reasons. They reported my auto score @ 596.
Yesterday I applied at roadloans.com and was approved for up to $16k, 18.29%, $0 down. I'm a little iffy on going through them though, I found one decent car in my price range after hunting through their limited list of dealers and it's already gone. As of right now I'm on a tight budget and will not pay 18% on a car I don't like or that's out of my $ comfort zone but I'm thinking if I can find the right car, I could maybe refi with the CU in a few months.
I admit, I've become gun-shy with credit and I'm a little anxious about committing myself to a long term loan so I'm not so sure I'm looking at this in the best way. Do I keep on the CU and try to get a recon if I get that letter showing a positive auto TL? Try to get through to Cap 1 again? Stick with roadloans?
I did cost comparison, my current vehicle vs the car I found yesterday and the new one came out WAYYYY ahead, even with the high interest rate so I was ready to jump on it. Now that the one suitable car I found is gone I'm second guessing my decision to take the roadloans option.
08-25-2012 10:55 AM - edited 08-25-2012 11:02 AM
My personal experience and that of many others whom I've read: if you need a car, and you're in need of financing, just wrap your arms around whoever will give it to you, regardless of what the interest rate is, as long as they report to the bureaus. It's unlikely you can recon the denial with C1, the reasons listed for the denial are in order of importance, and generally anything beyond the first and sometimes the second, isn't truly relevant to their underwriting decision and was included as an afterthought to meet legal requirements. Anecdotally that appears to be the case anyway. Also a letter from your prior lienholder likely isn't going to help either. It's unfortunate but that's how the system works: if it's not on your credit report, for most lenders, it doesn't exist.
Yes, it's suboptimal from a payment perspective; however, you can absolutely refinance that car 6 - 12 months down the road. That pretty much negates the "first-time-buyer" penalty which I and so many others experienced with the FICO auto-enhanced industry option.
Personally I used the junk loan refi to CU route; but I also had the knowledge that my credit report was going to look quite a bit better now than it did when I originally got the loan, so I felt comfortable in doing so. In my case though I put down 35% and still got a 19.35% loan, so I'm pretty surprised at your 0% down rates . Maybe I didn't shop enough and/or bought too expensive of a car hah. In any event, with an unpretty credit report, and not putting anything down, you don't have a lot of negotiation room especially as you're likely looking at a used car anyway.
From the sounds of it though, you're going to be in a better place too in about six months (that BK hitting the 7 year mark may be a bonus, and the auto tradeline with 6+ reported clean payments will absolutely help auto-enhanced scoes), so make sure you can afford it and you'll be OK.
On the other hand, on a tight budget, if your CU will give you 10K, why not ask them what the minimum loan amount they'll do is, and what the maximum age / mileage of a car they'll finance is? You might want to look into simply buying a car in the 2-5k range that you know you're going throw away in a few years, but since a car for most of us is required for income, you can fit a cheaper payment into your budget easier.
08-25-2012 12:22 PM
Thanks for the input Revelate. I think maybe I'm overthinking this.
I am very happy about the fact that someone is willing to give me the loan, possibly a little over excited and now I'm putting on the brakes. Life kicked me in the face more than once and I'm just really nervous now. For the past 10 years I've been buying cash only throw aways and it's just not going to continue working, I need something more reliable and less costly in terms of upkeep. I love my busted up Jeep but I'd also like something that doesn't wake the entire neighborhood when I start it in the morning lol
Pros on trying the CU again - No minimums on price, no max on age and mileage and I can buy from anyone BUT I don't have a suitable co-signer. It's a big fat NO GO unless/until they can get me a loan without another sig.
My biggest problem with Roadloans is going to be the limited dealers I can use but at least the restrictions aren't too awful. We tried re-applying with my DH as a joint applicant and they raised the APR and DP and lowered the loan amount Thankfully they didn't dump my original offer.
So... my hopes and dreams of a fairly quick refi aren't too far off mark? If I give it 6-7 months I'll not only have the payments made on the car but my personal loan will be paid off and I should have my CC utilization down around 5-10% (if it all goes close to according to plan). I'm determined to stay in the $10-12k range just in case but I would still be somewhat dependent on refi'ing to lower the payment within the year. I could handle it long term, it's not like we would go hungry or anything, but it would screw up my plan to pay off early and get to work on Dh's baddies. I'm not having much luck finding anything in that price range though and if I have to go up a couple of grand I could, but I would definitely need to refi in 6 months or it would start affecting our household budget.
08-25-2012 03:29 PM
I think your plan is reasonable. Between the lowered utilization rate if it's significant (call it 33% or higher) and the auto loan history, there's a non-zero chance you'll be able to raise your auto scores 30-40 points and it's apparently a world of difference shopping for used cars or refinancing at 640 vs. sub 600.
myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.>> About myFICO