Yes, it’s possible to get a car loan with bad credit. But you’ll have to work a little harder to get the money you need. You’ll also have to pay a bit more than if you had good credit. Still, it’s possible to get that new car in your driveway. Here’s some info on obtaining car finance when you have bad credit.

Subprime Borrowers

People with bad credit are often categorized as subprime borrowers. There is a subprime lending market for people who fit this category. Try to get a loan from a traditional lender first. If that fails, then the subprime market is an option.

Subprime lenders specialize in working with people who have low credit scores. These lenders are willing to accept more risk than traditional lenders. As a result, they are more willing to provide loans to borrowers rejected by traditional lenders.

The Influence of Your Credit Score

Your credit score determines your category status. Lenders have their own criteria for determining if you’re a subprime borrower or not. If your credit score is too low for a traditional lender, then they won’t consider giving you an auto loan. Most banks and credit unions want borrowers to have a credit score above 640. Anything below 640 is considered subprime.

Higher Interest Rates

You already know that you have bad credit. So, that means you’ll have to work with a subprime lender. To offset the high risk, a subprime lender charges a higher interest rate. That means you’ll pay more in interest than you would for your car finance if your credit was better.

Providing loans to subprime borrowers is a high-risk investment. The lender needs a higher rate of return to make the risk worth it. As a result, subprime lenders charge interest rates that are sometimes double those charged by traditional lenders. But that doesn’t mean you shouldn’t shop around for the best deal.

Comparing Lenders

Even if you have bad credit, you should still compare lenders. It’s never a good idea to settle without considering at least two or three other options. But you’ll want to avoid financing from the car dealership. It’s an unfortunate fact that some dealerships take advantage of people with bad credit. They know your financing options are limited and use your situation to their advantage.

A better option is to seek lenders who aren’t associated with any dealership. As mentioned earlier, you’ll likely pay a higher interest rate either way it goes. But you’re likely to get a better deal if the lender has nothing to do with the dealership. The fees and terms of the loan will possibly be more favourable. And remember, you can get approved for a loan even if your credit is bad. Subprime lenders are ready and willing to give you a chance. Contact Us today to find out your financing options.