Special Financing Auto Loans
Nobody ever plans on having their credit damaged. However, job losses, illnesses, deaths, and other financial issues crop up in the lives of most families, and it can be difficult to keep a good credit score during these times of trouble. Meanwhile, you might need a car to get to work or take your kids to school, and you might think it is impossible to qualify for financing when you don’t have any cash and your credit score has dropped.
The good news is that you can find second-chance or subprime auto financing companies that are willing to provide money to people without great credit histories. In fact, obtaining an auto loan is one of the best ways to build or establish good credit in the future. At Valley Auto Loans, we specialize in helping people find the best possible car loans, so they can get back on the road as quickly as possible.
Auto Loans are sometimes a Necessary type of Debt
Auto loans are a type of secured debt. This means that the loan is actually secured by the vehicle that is purchased with the loan. Mortgages are another common example of secured debt. In that case, the mortgage is secured by the home it is used to purchase. Contrast that to unsecured debt like credit card balances.
Credit bureaus and finance companies tend to look more favorably on secured debt when they calculate credit scores or decide who to loan money to. This is partially because secured debt is already backed by a valuable asset.
There are several reasons that secured debt is more favorable than unsecured debt, and these include:
- Credit bureaus and financing companies understand that most people cannot afford to pay cash for expensive and essential items like houses and cars.
- The items that secure the debt should have value while the loan is getting paid off.
- Once a secured loan gets paid off, the credit does not automatically renew, but one paid loan can make it much easier to secure another one.
- Interest rates for secured loans tend to be much lower than interest rates for unsecured debt.
How do Subprime Auto Financing Companies Help?
Bad credit lending might be a polite way to refer to companies that are willing to do business with people who have poor credit. However, that does not mean that dealing with these companies is a bad idea. You might expect to find that interest rates will be somewhat higher than those offered to car buyers with very good credit, but you might use these poor-credit loan offers as a way to rebuild your credit, so you can get low-interest rates the next time you need to buy a car.
This is how a subprime car loan can help you rebuild your credit:
- Each time you make your payment on time, this gets reported to major credit bureaus like Experian, TransUninion, and Equifax.
- Over time, your good payment record has a positive impact on your credit score.
- When it comes time to apply for your next auto loans, all sorts of lenders will be eager to work with you because you have re-established a good credit history.
- You may even be able to refinance your car loan at a lower rate after making payments for several months.
What Kind of Cars Can People with Poor Credit Buy?
Not only can a special financing company help you rebuild your credit, it can actually help you get back on the road in style. Some people assume that they can only afford old, worn, and even unsafe cars without good credit. This is actually not true, and you might even find that you can get better rates if you purchase a new or like-new used car than if you buy an older vehicle.
Lenders do consider the financial situation and credit rating of borrowers. But they also consider the type of vehicle that will end up securing the loan. If they are going to provide you money, they would rather have you purchase a more reliable and more valuable vehicle that is likely to outlive the term of the loan. This gives them more assurance that the loan will not put you in a bad situation because your car won’t run or need to be replaced before the loan term is over, and that makes car financing companies more eager to have you as a customer.
In other words, you may very well be able to use a high-risk loan to buy a very nice car. This might be a new vehicle right off the manufacturer’s delivery truck. In other cases, it might be a late-model used car. Either way, you can drive out with a reliable and safe vehicle that you can be proud of.
How to Find the Best Special Auto Financing with Poor Credit
You might be able to find loan offers from local dealers who are used to dealing with people who do not have ideal credit. They may even offer in-house financing or work with special car lending companies of their own. However, you are never obligated to take advantage of financing from a dealer. You are free to bring in your own loan offer.
In fact, some auto dealers may figure that they have a captive audience. They might offer poor credit car loans, but these may come with harsher terms, higher interest rates, and larger payments than you could get if you shopped around. You could shop by driving around from dealership to dealership, but this can be frustrating and time-consuming.
Don’t you wish there was a simple way to simply find the best possible terms for a person in your situation? That is one reason that we help car buyers by providing competitive quotes for poor credit car loans. When you work with us, you can be sure of finding the best deal in your local area for a buyer in your situation. In fact, you will not be confined to lenders in your own town or city because we can deal with a variety of lenders all over the country.
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