Most financial institutions have stringent guidelines on the borrowers they would work with and the purposes for which they will provide loans.
No used vehicle older than five years will be eligible for financing. Used automobile loans have higher interest rates than new car loans.
And those who would be considered “subprime” borrowers receive loans from them only seldom.
An individual with poor credit is classified as a subprime borrower. He might be overspending on his credit card or falling behind on his expenses.
The typical credit score for a subprime borrower is below 620. Is it true that you will never be able to apply for another loan again if you fall into this credit-risk category?
Read: 3 Factors to Consider When Applying for a Car Loan
There are auto loan providers who will work with those with less-than-perfect credit. Don’t deal with any lenders who boast rates as low as 1.9% interest**. Take note of the symbol (**).
In smaller type below the larger advertisements, the ** indicates that the offer is restricted to borrowers with exceptional credit. You are obviously not a part of this elite crew.
A lower credit score will limit your options when applying for a car loan. The rates of interest are extremely high. You could try looking for a lender through the Internet.
But, there are actions you may take to enhance your situation. The first thing to avoid is to rely fully on the auto dealer.
He will always get a set proportion out of vehicle loan agreements. It is highly recommended that you have your auto loan approved before you even step foot in a car dealership.
Read: How to Use a Bad Credit Business Loan to Improve Your Credit Score
Don’t go with the first creditor you find; conduct some research. Don’t settle for a “average” interest rate after shopping around.
For example, a borrower with a credit score of 800 might qualify for a lower interest rate than one with a score of 600. Inquire about pricing details.
You can also go to the bank or credit union where you have an active checking account.
By reviewing your credit record and making necessary changes, you can also raise your credit “category.” For instance, your credit report could contain inaccurate information.
