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Subprime Auto Loan

The subprime auto loan enables those with poor credit to buy a car.

A subprime auto loan is the type of auto financing loan that is often used for those borrowers with a spotty credit history. Even though you've had problems in the past, which has resulted in a lower credit score, you may not have to forget the idea of ever purchasing a new vehicle.

If you've applied for an auto loan only to be turned down by one bank, don't despair. Many banks will only lend to prime borrowers; those with pristine credit histories and high credit scores. However, there are banks and financing companies that specialize in the subprime auto loan for people just like you.

So now that you understand that you can probably still obtain financing for a new auto, there are a few factors that you need to take into consideration. The first is that a subprime loan will typically have a higher interest rate. In fact, the interest rate will often be considerably higher than the interest rate available to those with good credit.

The second consideration for a subprime auto loan is that the length of the loan, or the loan duration may be shorter, especially for used cars. Instead of getting the 72-month loan, your loan may require payoff within 60 months. This shorter loan term will make your payments higher, so that is definitely something you will want to keep in mind when applying for a second chance auto loan.

There are a couple of things you can do to ensure you get the best auto financing available in spite of your credit history. Be proactive in your approach to your personal credit by going online and checking your credit report. Make sure that your credit report is accurate, and if not, take the steps necessary to clear up any discrepancies.

A few other things: know your credit score, look into auto financing before you start the vehicle shopping and compare offers from different lenders. Remember a subprime auto loan can be the first step toward repairing your credit and re-establishing a good credit score.

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