If your credit score is not good enough to get a regular auto loan, do not give up and think that you cannot get the auto loan that you need. There are companies out there that will finance you even though you have bad credit. This type of loan is called a high risk auto loan. These loans give those with bad credit the opportunity to make a purchase that they otherwise would not have had the opportunity to make. If you have already applied for a car loan and have been turned down, you will definitely want to inquire about a high risk auto loan. If you are someone who has not yet applied for a car loan online and are wondering if you will be regarded as a high risk applicant, then you will need to check your credit score first. You can do so by inquiring with the three major credit bureaus which are Experian, Equifax, and TransUnion.
What is considered a bad credit score?
A credit score of 620 or less is usually considered to be a bad credit score. If your credit score is 620 or below, chances are that in order to take out a car loan you will have to get a high risk auto loan. There should be no shame in obtaining a “bad credit car loan,” as it will help your credit improve in the long run as you make your monthly payments on time. The Credit Karma team has reported that the average credit score in the United States is 664; that tells us that there are many consumers who have bad credit issues and who would need to get a high risk auto loan in order to purchase a vehicle.
Preparing yourself before you apply for high risk auto financing.
When you apply for a high risk car loan you will have to provide the finance company with information about you that they require. Most of these lenders will require you to have a stable employment record for the previous six months. They will want to be sure that you will be able to repay the loan that they are granting to you. Your monthly income will also be a significant factor in determining whether they grant the loan to you or not. In general, you should earn at least $1,500 per month in order to obtain your loan, this gives the finance company something to work with in order to approve your loan. The creditor you’re working with refer to your finance package as a subprime or special finance auto loan. These are just more official names for this type of financing.
What happens after you get approved for the loan?
Once you are pre-approved, you will have already be familiar with what your interest rate will be, your interest rate will be very high due to your bad credit history. It is not unheard of for interest rates to be as high as 30% for those with a bad credit history. Unfortunately, high interest rates are just to be expected if you’ve got high risk credit. The goals here are to enjoy the new vehicle that has been purchased and to make sure that you make all of your monthly payments on time. If you default on your loan, they will repossess their car from you, resell the car and get their money back. The worst thing that could happen would be that your credit score would dip even lower. Remember that you have been given a great opportunity to improve your credit, and you will want to take full advantage of the opportunity that has been given to you.