Liberty Auto Loan: Connecting people with High Risk Auto Loans!

The business of lending money is a risky one. For every loan made, there is always a risk to the lender that borrower won’t pay it back. So, why would anyone go into the business? Since the number of people who fail to repay loans is so small in comparison to the number of people who do, the risk is worth it. Also, risk can be mitigated by securing a loan. In the case of an auto loan, financing is secured by the car which is subject to repossession in the event the borrower can’t meet the obligations of the loan agreement. But, there is a point at which many lenders will simply not touch an auto loan application with a ten foot pole. While many lenders will do business with bad credit customers, they won’t go out of their way to finance high risk auto loans.

For a lender what constitutes a high risk auto loan is the credit reputation of the borrower. This goes beyond credit scores to include the habits, and income, of the borrower. While a credit score will be a single indicator of the borrower’s credit-worthiness, the details in the borrower’s annual credit report will indicate patterns of behavior that can foretell whether that person will pay off the loan, or not. Sometimes the annual credit report will reveal a financial disaster erupting in the lives of borrowers creating a one-time dip in their credit scores right when they need financing the most. In these cases, lenders can usually rely on those borrowers to make good on their loans, especially if there are indications that their financial situation is in the process of recovering.

On the other side of the coin, if a borrower shows a pattern of late, or missed, payments, frequent delinquencies, and repeated attempts to open new lines of credit to fix other debts, then the lender will be far less likely to approve an auto loan. Instances where collections, or repossession, have taken place, lenders will also deny loan approvals. These are behaviors that alert lenders that a borrower would present a danger of purely failing to default on a loan. Where a borrower has a history of fraud, the lender has almost no choice but to deny the loan.

Apart from performing a background check, it’s hard for a lender to figure out how someone will perform over the course of a loan. That’s why lenders rely on credit scores to gauge the risk of a new applicant. There is an automatic cutoff point where lenders won’t approve loans, 550 to 540, depending on loan policies. Generally speaking, credit scores don’t drop this low unless there is a history of delinquency, charge-offs, or repossessions. This is “no credit” territory and finding lenders who deal with this level of risk are few and far between.

However, there are businesses that make it their specialty to work with people with no credit. Though the risk of dealing with these sorts of customers is very high, the lenders who do make this their business offer no credit financing with very stringent criteria. For instance, the borrower must have a steady income capable of supporting the loan payments. The loan will come with a very high interest rate and the borrower will forfeit the car should payments fall behind to a point specified by the loan agreement. Usually, these loans will require a minimum down payment above 20% of the total cost of the loan. Specific down payment amounts may be determined by the lender as a condition of the loan agreement.

While many car dealerships are willing to take greater risks in making auto loans, they too have their limits as to how low a credit score can go before someone can’t qualify for an auto loan. Credit scores below 540 are the typical cutoff, but that can vary from dealership to dealership. Some car dealers are known as buy-here/pay-here operations. Unlike dealerships that deal with several banks, buy-here/pay-here dealerships handle their financing themselves. These companies, most often, finance the sale of use cars through their operations and, because they aren’t authorized by any particular manufacturer, there has been much speculation as to the quality of the cars they sell. While there is the possibility of substandard service, many of these companies have a mission statement directed toward the high risk borrower in that they want to see people who’ve had credit troubles get back into the economy. While they impose strict conditions on their financing, their primary goal is to get people, struggling with bad credit, onto even footing and into better credit circumstances. Further, they want to see repeat business from these customers and will market a reliable product warranty to the best of their abilities. While there are a certain number of these businesses that run a crooked game, they are a tiny minority and can be weeded out when the customer asks the right questions.

Lenders who specialize in high risk car loans have listings with the Better Business Bureau as well as other consumer advocate groups and websites. It takes time for the bad credit customer to find the right lender as there are many who advertise for those people struggling with credit problems. That’s where comes in. By connecting customers with a network of affiliated lenders and car dealerships across the country, they can quickly sort through those that don’t meet their car loan shopping needs and those that do. When shopping is made easier, the consumers are more likely to spend money wisely. That’s the goal of Liberty Auto Loan – easy choices, wise decisions.