If you’re the type of person who wants a car but doesn’t have a lot of money saved up, then subprime car loans can be your saving grace. These types of loans are geared toward people with less-than-perfect credit histories and they often come with higher interest rates than normal loans.
Professionals like Lantern by SoFi say, “Subprime auto loans tend to carry much higher interest rates than their traditional counterparts.” This means that you need to exercise some financial discipline in order to use them effectively. Here’s what you need to know about getting a subprime loan.
You Have To Have A Job
You have to have a job. If you’re unemployed, if you’re on disability, if you’re on welfare (or at least claim to be), and even if the government has given some other reason for just plain not being able to afford a car (like maybe your wife wants one), this is not going to work out for you. You can’t get help with any of these issues—you’ll have to find another solution.
Know Your Credit History And Score
You’ll want to know your credit history and score. This will let you know what kind of interest rate and loan terms the lender is likely to offer. In other words, it tells you how much money you can get from a lender and what kind of rates those loans will have.
You’ll Need Some Sort Of Down Payment
If you don’t have a high enough credit score to get a prime car loan, you won’t be able to finance 100% of the car’s price. It’s usually between 10-20% and can be paid in cash or financed.
If you’re buying from a dealership, they might offer to give you an incentive like paying down your trade-in value if you finance through them. You might have options like making a gift from family members or using the money from selling something else that isn’t essential to your life, like an old car or even some furniture.
Remember That Interest Rates Are Higher Than Normal Loans
A subprime loan is a car loan that’s given to someone who has been declined for traditional financing. These loans are offered at higher interest rates because it’s considered riskier for the lender to be giving out a loan to someone with poor credit than it is for them to issue a loan to someone with good credit.
A prime loan is a traditional auto finance agreement that provides borrowers with favorable terms and conditions, including low-interest rates, low monthly payments, and flexible terms.
The majority of lenders offer prime loans because they are more profitable than subprime loans because they allow them to charge lower interest rates and still get paid back on time by their customers
As you can see, getting a loan for a subprime car isn’t that complicated. Of course, there are many more factors to consider and rules to be aware of, but as long as you have a steady income and some money saved up then it should be possible.
Just remember that subprime loans are meant for people who have been turned down by traditional banks because they still have some kind of credit score or history at least.