A subprime auto loan is used to finance a purchase towards a vehicle. It’s offered to consumers with low credit scores and limited credit histories. In general, it best to look around for comparable rates when looking for the best subprime auto loans.
Many subprime lenders have lowered their subprime auto loan rates making current subprime auto loan rates lower and easier to get than ever before. People with subprime credit, in the market to purchase a car may not believe they can even qualify for subprime car loans but are finding they can.
A “standard” credit report factors in the length of your credit history. This is the amount of time that you have used credit and setting up revolving payment accounts. Check your credit report for accuracy. Correcting any problems on your credit report before applying for a loan is strongly advised.
It has to be understood that while one lender might see your credit score of 580 as being unacceptable. Subprime lenders consider a low credit score for car loans acceptable to meet the requirements of their loan.
Subprime lenders are not all the same when it comes to requirements and delinquencies with past credit experience. Look at the table below to decide where you fall concerning credit. Auto Loans companies use this information to determine many factors that play into your subprime car loan.
- Decent | 625 – 600
- Average | 600 – 575
- Below Average | 575 – 550
- Semi-Poor | 550 – 525
- Poor | 525 – 500
- Bad | 500 – 450
- Awful | 450 – 425
- Terrible | 425 – 400
When analyzing applications for the best subprime auto loan rates, not every credit score is viewed in the same light. For example, a 575 credit score is not always looked at as unsatisfactory. The credit history is checked along with the score to find out exactly what happened to generate that number.
Subprime Auto Lenders look at Credit Reports Differently
A “standard” credit report treats all loans equally. A missed payment on a credit card is processed the same way as a missed payment on a mortgage. Many reputable subprime auto lenders recognize that people who have gone through hard financial times prioritize their debts. Missing a credit card payment is not as crucial as missing a payment on a bad credit auto loan or a mortgage payment.
Many young people who do not have a credit card or any other loans are often told that they do not have a long enough credit history to qualify for an auto loan. We find this to be true with college students and first-time car buyers. People in this category might be perfectly capable of paying back the loan, but the lack of information about their ability to do so means they cannot get a loan.
Using these credit scores was disqualifying many people from getting an auto loan when they would most likely be able to pay back the loan. For this reason, the auto lending industry started computing its credit scores. This means that many people can secure a car loan with poor credit.
What Credit Score Is Needed to Buy a Car?
It varies by the lender; certain companies specialize in giving loans to those who may get turned down by a bank. Individuals with scores higher than 720 qualify for the best rates on loans, while people with scores lower than 500 typically can’t get a loan at all. If your credit score is at 550 or below, you are considered to have subprime credit and are categorized as a high risk of paying back a car loan. Your credit scores that the auto lender sees can be different from the one you see online. This can put you in a bad situation when trying to get the lowest interest rate.
His/her questionable credit history will be examined to decide whether it is habitual or situational. Subprime lenders look at more than just a credit score for the best subprime auto loan rates and approval. Subprime borrowers require special financing to repair their subprime credit scores.
Lenders look closely at a person’s ability to pay back a subprime auto loan or special financing with steady paychecks from work history. Many car dealers and auto loan lenders use your auto loan credit score history to judge your ability to pay back the loan.
Your car loan credit score is different from your standard FICO score. It shows all your auto loan history. This can be useful if you have bad credit or no credit but have always made your car payments on time. For someone in this category, subprime auto loans are a solid option to get a car loan when having bad credit.
Using Subprime Auto Loans to Build Credit
After some credit mistakes or unforeseen emergencies, consumers need help to rebuild their credit rating. A subprime auto loan gives people the chance to start fresh with a new loan and an opportunity to rebuild their subprime credit.
After completing all payments on time, an individual will see their credit rating improve. In just a short period, consumers will find some stability for themselves. Want to improve your credit by getting a loan? Car Loans of America are here to serve anyone who carries bad credit and we also provide same day funding with bad credit auto loans throughout the United States.
Subprime Auto Loan Benefits
With a reliable vehicle, borrowers who are using sub-prime loans can find better-paying jobs and put an end to needing to rely on public transportation or loved ones. A person in need of a subprime auto loan may pay more, but there are some tremendous benefits. After all, they do not have to worry about their car breaking down all of the time or about the car giving out after a year or two. The best subprime auto lenders know that car loans give people the chance to invest in a reliable vehicle, which improves job options and credit.
Subprime Auto Funding Options
Lenders know that consumers need a leg up in the world, especially now that the economy has come around and is thriving again. Banks can offer lower interest rates to subprime credit buyers thus; it is possible to find some great rates even on subprime options.
Research not only the loans’ rates but also the lender’s reputations. Check websites and forums dedicated to this very task. Use the Better Business Bureau as another resource to research different auto lenders. Another bonus to some of the best subprime auto loans is that people can compare the rates online or in person. This makes it easier for people to look at different rates and terms. Thus, a consumer can be educated about finding the very best online car loan for him or her. There is a variety of lenders today that offer subprime auto loans and Car Loans of America offers services to evaluate your current situation and find a subprime lender that is right for your new car loan.
How to Get Approval for Subprime Auto Loans
Most subprime auto loan lenders today allow consumers to go online, apply for a loan, and hear back within moments. Quick approval helps consumers see what their options look like. Now, a person can then call the lender up and see if there any further options for better rates. Subprime car loans, while irritating and embarrassing to customers, are an important part of the auto loan qualifying process.
Budgeting means not only knowing one’s leftover income after all expenses are paid, but also what they can afford to spend monthly. Lenders will want proof of earnings, and it helps to have a car make and model in mind. If a consumer walks in knowing which car he or she wants to buy, this can speed up the process. While requirements differ from lender to lender, there are general rules that Car Loans of America has in place for applicants.
- At least 18 years of age
- Currently lives in the US, and is a legal citizen
- Guaranteed employment (full-time or fixed) with at least a gross income of $1,500/month ($1,800/month suggested)
Gross income is the amount that you make per paycheck before it is taxed. To stay on the safe side, we require that all applicants verify and confirm their income by showing a record of past tax documents. Benefits such as child support, social security, alimony, or disability insurance should be included as well. Your options for a subprime car loan may be limited by your employment status. Documented evidence of income. Income must be documented on professionally prepared and filed tax returns for the past two years.
Evaluating Subprime Auto Loans Rates
Shopping around and evaluating auto loan rates from multiple lenders takes time. Evaluating Subprime auto loan rates with a car loan calculator can save you time, money, and the hassle of having to sit down with a lender and have them crunch the numbers for you. When evaluating subprime auto loan rates, be sure to understand what you can afford monthly and have a clear picture of the type of vehicle you’re seeking.
Unfortunately, there is much more to make the best subprime auto loan choice for saving the most amount of money possible on your next car loan. Knowing your options and taking the right steps to reconstruct your credit score is important! Do your research and be a forward thinker. Take everything into account when it comes to applying for the best subprime auto loan rates.