Not everyone gets the privilege to be approved for a car loan right away. Those who have an excellent credit score above 700 can receive an auto loan with lower interest rates. However, people with bad credit with a score below 620 may not be approved for a car loan and if they are, their loan rates will be high. It would be ideal to hold off on car buying until you have the proper credit score and the money to do so but in some cases, a car is necessary for work or when there is no access to public transport. If you check your credit score and it’s sup-bar, bad credit auto loans solutions exist and one of them is to apply for a pre-approved subprime auto loan from a wide array of auto lenders.
What Is A Pre Approved Subprime Car Loan?
Pre-approved subprime auto loans are still approved auto loans, the difference being that this option serves a different type of individuals. People with credit scores below 620 are eligible for pre-approved subprime auto loans in order to purchase a new or used car. These pre-approved car loans for bad credit exist because auto lenders do not consider car buyers with bad credit as dependable borrowers and want to ensure that they will receive their money at the end of the term.
What Comes With A Subprime Auto Loan?
Just like other preapproved auto loans, pre-approved subprime auto loans come with a car payment term with an interest rate. With good credit, you can expect a lower interest rate that ranges from 2-5% with few additional fees. With a subprime car loan, interest rates may be twice as much as those with good credit or even more plus additional fees. This personalized loan comes with rates and fees that are usually non-negotiable or have very little room to negotiate since bad credit scores show the lender that you pose a high credit risk.
Are Subprime Car Loans Bad?
Even though it has “sub” in its name, subprime car loans are a still viable option and sometimes it may be the only option. These bad credit loans can be more affordable in the long run even with the high-interest rates because it provides those in need of a vehicle an option.
What Should I Do With A Pre-approved Subprime Auto Loan?
Before you meet with an auto lender at a car dealership, it is important to check your credit history, credit scores, and an estimate of monthly payments that you can afford. With this in mind, you should use a payment calculator and consider your budget and what you need in a car – anything else an auto lender may suggest just means extra fees. Always research your subprime car loan lenders to ensure you work with a reputable one and avoid scams.
When you apply for an auto loan with bad credit, do not be afraid to negotiate car prices for the purpose of saving money – after your in-depth research, you should be aware of what buying the car is worth and how much you are willing and able to pay for each car payment. Try and avoid add-ons that you don’t need as it raises the price of the car. Before signing the contract, read it and clarify any sections you may not understand.
Loans for bad credit exist. Do not be discouraged if pre-approved subprime auto loans with bad credit are your only option. After purchasing the car from car dealers, remember that building credit means to make every car payment and continue improving your credit score. As a high-risk borrower, auto lenders may be quick to repossess the car leaving you car-less and still in debt.