Liberty Auto Loan: Subprime Auto Loans and Subprime Auto Financing!
Good credit is known in the lending industry as being in the prime lending category. This directly related to the “prime lending rate,” or “prime rate,” which you may have heard about on the morning news. These refer to interest rates banks set on the trading of bonds, certificates, and other methods of moving large sums of money in the form a loan. This rate is set by the Federal Reserve and is not a legally approved interest rate that banks are allowed to use. It is a benchmark by which banks will, generally, lend money to one another. From the mark banks use, other lending institutions will set interest rates at, or near, the prime rate when they make, let’s say, auto loans. Have your eyes glazed over yet?
Prime is the ideal, the greatest in strength, first in rank, etc., which is why the lending industry applies the word ‘prime’ to the interest rates they attach to loans to their best customers. There’s even a category called super-prime which is a condition held by very few consumers, since it means they have absolutely flawless credit. This is not you. You may be in the position of having average credit. This is where the majority of us live… otherwise we wouldn’t call it average. And for lenders, average credit is known as the non-prime lending category. It’s neither bad nor good, and most people can live with this ranking without having to struggle in order to find mortgages, get credit cards, or auto loan. Life at this level is still comfortable.
If you have below-average credit, you fall into the sub-prime lending category and it means you’ll have to pay higher interest rates on auto loans – if you’re even approved for one. For lenders, this is a high-risk category and they must increase interest on these loans in order to protect themselves from the possibility that you might default on the loan. Subprime auto loans are not the business most lenders would prefer to be in. But, since no one is perfect, they’ll settle for average with an interest rate that won’t cause their customers to blow a blood vessel. You may not be this lucky.
Having bad credit is not a good thing. Although there are a number of lenders who specifically target people with bad credit with ads boldly proclaiming that everyone is guaranteed for approval – bad credit, no credit, no problem! The approval process is so streamlined these days, that most people can get a decision from a dozen lenders in a matter of hours even for people applying for sub-prime auto loans – and, the answer is more ‘yes’ than ‘no’. How can this be if you pose a bigger risk to these companies? The answer is in their ability to analyze credit scores faster, to gauge your income quicker, and to quickly factor in how much money you currently owe to different creditors.
Your credit scores are available, with your permission, for any lender to view. From these scores, your lender gets a quick snapshot of how bad your credit might be. If you think it’s bad, your lender might think it’s worse and you’ll want to know what your credit scores are rather than take some other guy’s word for it. Your scores can be retrieved at anyone of the major credit reporting bureaus, Equifax, Experian, or TransUnion, for a nominal fee. It’s worth paying the money for accessing this knowledge as it puts a little bit of power back in your hands.
When you have a credit score that falls below 620, you’ve entered bad credit, or sub-prime, territory, which is where auto loans start getting difficult. But, there is a lot of space between 620 and 300, which is the very bottom of the credit pile. If you’re in a situation where you’re only a few points below non-prime, you may be able to negotiate your way up to a non-prime depending on how much money you make and how much you’re willing to pony up for a down payment. When you’re close to the cut-off point for non-prime auto loans, going the extra mile with your lender can save a ton of money.
At the other end of the sub-prime auto loan industry, coming close to a score of 550 puts you in dangerous turf as this is the point where lenders will automatically deny auto loans. This is the deep sub-prime lending category and auto loan approval for these people is very rare. To reach this point, you must have experienced at least one instance of collection, or repossession, and crawling out of this hole is tough – but not impossible. There are no irreparably damaged credit situations, unless some sort of fraud or other legal activity was involved, and it only takes time and a little self-discipline to fix being in a no-credit situation.
Deep sub-prime auto loans are issued only under very particular circumstances and come with strict conditions you must adhere to if you want to keep from losing your car and the money already invested. Very high interest rates and severe penalties for late payments are attached to these loans. If you are in a deep sub-prime auto loan agreement, it is of utmost importance that you stick with the plan, or lose whatever is left of your reputation. In these loan programs, there might be requirements for credit counseling, maintaining minimal income rates and other restrictions. For the most part, lenders who sponsor deep sub-prime auto loans make it their priority to keep you in your car and get the loan paid off. If you can’t make the payments, don’t just sit in the dark and wait for the repo-man to come. Get on the phone and speak with your lender on rescheduling your car payments. You may have to pay longer on the loan, but you can pay less each month.
While that last situation seems very dire, it really is an opportunity to improve your credit standing. Adding a new line of credit, adding a different line of credit from those you already have, and making all of the payments on time, helps to move your credit scores upward. Completion of the loan without incident further adds to your credit reputation in that your lender will be more receptive to working with you on your next auto loan. Why wouldn’t a lender want to finance an auto loan for someone who did such a great job paying back the first loan?
Sub-prime auto loans are on the rise as the economy slides further downhill. You’re probably in the same boat with many of us as you still earn a decent income, but have only had a few hiccups in your finances that pushed your credit rating below prime. There is a big market in sub-prime auto loans, and lenders will compete for your business if you’re among those who’ve just hit a bump in the credit road. Recovery from sub-prime credit is not a difficult feat. You’re primary responsibility in life, is paying your bills, and you only need a budget to keep those bills from getting ahead of you.
Finding lenders who specialize in sub-prime auto loans is easier if you know where to look. Liberty Auto Loan is a consumer connection site which connects consumers with affiliated lenders and car dealerships across the country. From a safe, secure website, the consumer can make the decision on who to do business with in his, or her, own backyard, or anywhere in the United States. When shopping is made easier, the consumer is more likely to spend money wisely. That’s the goal of LibertyAutoLoan.com – easy choices, wise decisions.