Car shopping is an exciting time. A vehicle can help with simple tasks like getting groceries or it can help you get a job with a vehicle requirement. Buying a car involves some planning to help ensure you have your finances in order. Do you have good credit? Consider subprime car loan.
Without an adequate credit rating, getting the financing to drive your desired car of the lot can be very difficult. It’s not impossible to get approved for a loan but what do you do if you have bad credit because of poor money management or personal issues such as bankruptcy, divorce, medical bills, or job loss?
According to industry estimates, one-third of Canadians looking to buy a new or used car do not qualify for prime interest financing.
Although you will face higher interest rates and less favourable terms to compensate for higher credit risk, applying for a subprime car loan is one way to get financing for a vehicle that you may need to get to work or to transport your family.
What should you know about these types of loans before applying?
Secured credit car loans
With a secured credit car loan you must include something as collateral. It is also known as a car collateral loan or a car title loan. This means that your vehicle will be repossessed if you are unable to pay back the loan. The attractive feature of this type of loan is that you can secure a lower interest rate depending on your financial health. They often feature a fixed repayment rate and a high approval rate. Down payment may not always be required or small down payment may be required in comparison to an unsecured credit car loan.
Another advantage with a car title loan is that you may be approved quickly. Some lenders can approve you the same day you apply. Because the value of your car will determine the amount of money you can borrow from the lender, lenders don’t typically run a credit check for these types of loans.
Unsecured credit car loans
Unsecured bad credit car loans can be costlier than their secured counterparts. As there is no collateral (the vehicle can’t be repossessed) the lender is at greater risk and you’ll need to pay a higher rate of interest. If you are unable to make payments, the lender will pass the debt to a collection agency or sue for the balance owed.
Interest rates are rarely renegotiated
Loan terms vary across lenders with the most common being 36 to 72 months. Unless you are refinancing to buy another car, most lenders will not rewrite existing loans despite what the salesperson will tell you.
Other things to remember
If your credit is much below average, dealerships may take advantage of that fact and offer things that may put you further in debt. Be sure to carefully assess car prices, interest rates, and your own credit report to be sure that everything is correct.
When you do get a loan for your vehicle, be sure to get everything in writing including the financing, interest rates, and when the loan term may be renegotiable.
Are you looking for a subprime car loan in Surrey or Burnaby?
Learn more about how Instant Auto Loans can help you finance a car with a car title loan. With some of the best rates in the short term lending industry, our car collateral loans can help you with your financial needs. Give us a call today or apply online.