Subprime Auto Loans for a Poor Credit Score
- 1 Subprime Auto Loans for a Poor Credit Score
- 2 What is a Subprime Car Loan?
- 3 Subprime Auto Funding Options
- 4 Subprime Car Loan Requirements
- 5 Subprime Auto Financing Tips
After some credit mistakes or emergencies, consumers need help to rebuild their credit. A sub-prime auto loan gives people the chance to make payments on time and work on their financial situation. After a year of on-time payments, a person will see their credit rating improve. In just a short period, consumers will find some stability for themselves. Subprime car loans can give you a chance to start over with a reliable source of funding. Anyone who has worried they will never find a car loan can rest easy thanks to subprime auto loan options. Fortunately, banks offering subprime auto loans and subprime auto lenders have responded to this need by providing car loans for people with bad credit. Banks offering subprime auto loans and auto refinancing with bad credit are great news for many. Many lenders have lowered their subprime auto loan rates making current subprime auto loan rates very reasonable. If you are thinking about using one of these loans as a way to bring a credit score up again, you should certainly try to understand how they work.
As you would expect, it is easy to apply for a Subprime auto loan if you have less than excellent credit. Just fill the application out and wait, right? Unfortunately, there is much more to making the best choice for saving the most amount of money possible, knowing your options and taking the right steps to reconstruct your credit score. Our page is your ultimate guide to pre-qualify for a sub-prime auto loan and making the most informed choice possible in the process.
How do I know if I need a Subprime car loan?
When people think of their credit score, they typically think of the number assigned to them by one of the three main credit bureaus. By their rankings, 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. Many people find out their credit score when they apply for a credit card. Often, they are told that they do not qualify for a card but never told the reason.
“Many subprime auto lenders have realized that these scores do not give the right information.”
For many years, most car dealerships used this same set of numbers to decide whether their customers could qualify for an auto loan. Recently, many subprime auto lenders have realized that these scores do not give the right information to decide whether or not a person is an acceptable risk or not for an auto loan. There are several reasons for this.
Lenders look at credit reports differently
A “standard” credit report treats all loans equally. A missed payment on a credit card is treated the same way as a missed payment on a mortgage. In life, 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. Check your credit report for accuracy. Correcting any problems on your credit report before applying for a loan is strongly advised.
Secondly, 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. 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.
Obviously, 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 their own credit scores. This means that many people can secure a car loan with poor credit.
Typically, an auto credit score gives more weight to an individual’s payment history on vehicles. Someone who has missed a few payments on a credit card but has managed to make full, on-time payments on their car loans will probably be able to qualify for a new auto loan. Bad credit refinancing for their old loan is possible to recapture some of the equity they have accumulated. Reputable subprime auto lenders base their loan on Their job and income at that time, even though they may not be able to get a new credit card.
What is a Subprime Car Loan?
A Subprime car loan is a particular type of car loan designed for people with poor credit histories. A credit score is often considered being “bad” or “low” when the FICO score falls under 640. Those that have credit scores that lie under 640 are labeled by many lenders as being risky to deal with, and therefore, it is hard for them to find loans or lines of credit. The best subprime auto lenders know that subprime auto loans can be used to rebuild credit when you cannot qualify for a loan because of a low credit score. They are the best car loans for bad credit to help repair past credit mistakes.
Reputable Subprime Auto Lenders
Subprime auto loans get a bad rap because of their high-interest rates. However, this is still a reliable form of funding for people today. The high-interest rates protect the lender in case a person is unable to repay the loan. Accessing subprime funding is easy because many reputable subprime lenders offer them to people who have spotty credit histories. All a person has to do is prove they have a source of income so that bankers can be sure their loan is paid back.
Sub-prime lending is an excellent option for people who need car financing but have experienced some turbulent times in the last decade and can’t qualify for a conventional car loan. Many people today are working on rebuilding their financial situations. A subprime auto loan gives people freedom, flexibility and the chance to find some great jobs and rebuild their credit score.
To make sure you are on the right page, consider obtaining a free copy of your credit report to get an idea of where you stand financially before you sign up for a car loan. Websites like AnnualCreditReport.com offer one free copy every twelve months for users. Before you apply for a loan with Valley Auto Loans, be sure to look over your credit report for accuracy and any discrepancies so that you are not assessed against incorrect information or old, nonexistent accounts.
Subprime Auto Loan Benefits
With a reliable vehicle, people 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. You get what they pay for. The best subprime auto lenders know that auto loans give people the chance to invest in a reliable vehicle, which improves job options and credit.
No Limitations with a Subprime Car Loan
When consumers decide on a subprime car loan, they do not have to limit their car choices. Instead of only having a thousand dollars to spend, a person may have three or four times this much. This means that a consumer can invest in a reliable car that will not break down. Not having limitations makes the car shopping process far easier to manage.
Easily Compare Rates Online
Another bonus to sub-prime 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 car loan for him or her. There is a variety of lenders today that offer subprime auto loans.
Subprime Auto Funding Options
You do not need to worry about a sub-prime car loan.
Because of the recession, Subprime auto loans are becoming very common. Lenders know that consumers need a leg up in the world, especially now that the economy has come around and is thriving again. Thus, it is possible to find some great rates even on subprime options. Consumers should research not only the loans’ rates but also the lender’s reputations. Thankfully, there are many websites and forums dedicated to this very task. The Better Business Bureau is another resource to turn to when researching different auto loans and lender options.
Quick Approval Removes Stress
Most subprime auto loan lenders today allow consumers to go online, apply for a loan and hear back within moments. No one wants to wait weeks to hear back on whether he or she can finance a car. Quick approval helps consumers see what their options look like. After seeing this, a person can then call the lender up and see if there any further options.
Subprime Car Loan Requirements
Consumers need to organize their finances before they apply for a subprime auto loan. This means not only knowing one’s monthly income, but one can afford to spend on this vehicle. Lenders will want proof of earnings, and it helps to have a car make and model in mind. In fact, 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 requirements that Valley Auto Loans has in place for applicants. These requirements entail:
- At least 18 years of age
- Currently lives in Canada or 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. Of course, 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. To make sure that all of our approved applicants will be able to make payments on their vehicle loans, we cannot accept applicants that hold seasonal positions or have been at a temporary job for less than 6 months.
Degrees of Subprime Credit
It has to be understood that while one lender might see your credit score of 580 as being unacceptable for receiving a car loan, another might consider it to meet the requirements of their loan. Look at the table below to decide where you fall in terms of credit. Valley Auto Loans uses 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 each subprime car loan application at Valley Auto Loans, not every credit score is viewed in the same light. For example, a credit score of 575 is not always looked at as unsatisfactory. In actuality, the credit history is checked along with the score to find out exactly what happened to generate that number. His/her questionable credit history will be examined to decide whether it is habitual or situational.
Situational Subprime Loan Credit
A bad credit score is shown when a person’s history is filled with maxed out credit card balances, missed payments to various accounts, frequent changes in jobs, and low-income. On the other hand, a situational poor credit history might show that someone has kept a high-paying job and has diligently made payments on credit accounts. They then had an unexpected financial emergency springs up and lost their good credit score. In this case, the person with a situational bad credit score would likely be perceived as less of a risk. Less risky than offering car loans to drivers with terrible credit, even though these two people technically have the same credit score.
Typical traits of subprime credit history include multiple outstanding balances, bankruptcies, and delinquent on the present accounts. Common characteristics of a situational poor credit history include sudden loss of job, divorce, a medical emergency, illness, etcetera.
Improving Your Credit
Taking the right steps to reconstruct your credit score from 575 to 640 may seem like a daunting task, but it is probably the best way to get better rates on your auto loan. If an applicant’s credit score is below but close to 575, it is likely that they can even qualify for a loan, but they probably don’t qualify for the best or even the mid-tier rates. People with scores at or above 640, however, are usually able to be eligible for these mid-tier rates, allowing them to save thousands of dollars over the life of the loan.
Many have discovered, because of a bad credit score, they were not eligible for the financing they need for their dream car. Fortunately, there are things you can do to get your credit score up. If your score is hovering 575, odds are you’ve made a few small mistakes with your credit. You have not, however, made a major mistake such as filing for bankruptcy or going through a repossession within the past three years. Therefore, these strategies should help you get the increase you need to qualify for better rates.
- Pay off charged off accounts. The most common reason for having a credit score in the high 500s is an account that didn’t get paid. Usually, this is an old medical bill or credit card that got sent to a collection agency when you forgot to pay the bill. A charge-off is sold to a bill collector who pays pennies for the amount you owe. The difference between what they paid and what you owe is their profit, but it also means that you can negotiate with a bill collector to get the bill reduced. By agreeing to pay off the balance, the bill collector makes a profit and is usually willing to take the wrong information off your credit report. Of course, make sure you get this agreement in writing before you pay off any old bills.
- Pay down your debt. If you are using a lot of your available credit, your score will go down. Get some of your debt paid off, or ask for the limits on your credit cards to be raised to improve the ratio between the debt you owe and the credit you’ve been extended.
- Wait. If you missed a payment, odds are you will not be able to get the mistake taken off your record, but it will affect your score less and less as time goes on. Wait a few months, don’t make any mistakes, and your score will go up.
To Start the Subprime Car Loan Process
The auto loan process starts as soon as you apply for one. After completing an application and submitting it, Valley Auto Loans will begin the search in a vast network of the best subprime auto lenders and financing groups. There is no application fee and no obligation. We also offer auto refinance for bad credit, so as your credit improves over time you have the ability to refinance later for a lower interest rate.
One subprime car loan lender might be willing to lend money to an individual that has a car repossession in their history while another might consider it too high of a risk. This is why using services like Valley Auto Loans to search a diverse database for lenders that meet your needs is the best route to go. Because the network spans over such a long distance and has so many dealers, it is easy to find a match for any applicant, regardless of his/her credit situation. When the dealership is located for the applicant, they are then free to contact him/her about vehicle options. The vehicles availability and the loan agreement terms will depend on the individual dealership.
Subprime Auto Financing Tips
It is likely that you’ll eventually want to be able to cruise any dealership of your choosing and be able to settle on a price that will be fair. Without having to worry about being turned away because of your credit score. Subprime car loans from Valley Auto Loans can help make that a reality! Lenders will begin reporting your payments to credit bureaus, and because of that, it will not be long before you start seeing some positive change in your credit rating.
We do suggest that before you head to the car dealers you should look through the valuable resources on our resource page. Please read through the “New car” and ” Used car buyers guide”. Take advantage of the payment calculators to help you get an idea of what you can afford. You will also find a variety of “How-To” information, like plugging a leaking tire or jump starting your dead battery and more.
Collateral Helps the Process
Car shoppers should know that saving up even a small down payment can help lower rates and improve terms. Lenders want to see that people are invested in their financial future and responsible. A small down payment, even just a small percentage of the total loan, shows a bank or lender that a person has taken the time to save and plan ahead. This is a chance to shorten a repayment period, lower interest rates, or slash away at monthly payments.
Additionally, if there’s a vehicle that you have your eye on that is just out of your financial reach. Ask the dealer to let you see a copy of the factory dealer invoice and consider making a bigger down payment. A more significant down payment sends a bold message to the lender that you are more serious about the vehicle. They have more of your money in hand for security if you default on payments or sustain a repossession. You can put anywhere from a small percentage to nearly half the vehicle’s worth down. This strategy is most useful for those that suffer from a situational credit history and want to make a point that they are financially responsible.
If you’ve run out of options for finding subprime auto lenders whom you trust with getting a car, the time is now to apply with Valley Auto Loans. You are not going to find any other organization that will face you up with countless dealerships and help you narrow down the perfect one to work with, according to your needs and credit situation. Save yourself the time and hassle of getting involved with the wrong lender, and apply with Valley Auto Loans today for a personalized subprime car loans and consultation.