Having subprime credit is not the onus it once was. The recent financial crisis sent a number of stellar credit scores south as job loss or pay cuts made old payments newly unaffordable. Getting a subprime auto loan may be the only way to head back in the right direction, but it can also be a bit of a shock to traditional borrowers. Here are a few tips to keep in mind when shopping for an auto loan.
- Check your credit score. You can get a free copy of your credit report from the major agencies. Make sure all entries are correct before shopping for a loan.
- Put together a down payment. Subprime auto lenders will require one and 20% is a recommended target.
- With your down payment in your hand, shop around for loans. Start at your usual bank, move to a credit union, then look into lenders who provide bad credit auto loans. You may get surprised along the way; if not, you will have at least looked into all of your options.
- Secure the shortest term loan possible. Bad credit auto loans come with higher interest rates. The lower your credit score the higher the rate. Minimize the overall interest you pay by making fewer payments.
There is no reason to assume that you have to get a subprime car loan. Many lenders are loosening their credit requirements and are sitting on more money than they can lend. Look into all of your options and you will find the best loan available to you.