“Low credit” is a term often used as convenient shorthand for low credit score, which translates to more or less the same meaning as bad credit. Low credit auto loans are taken out to purchase vehicles by people whose credit scores make them ineligible for most other financial products. Such auto loans encompass a fairly impressive range of diversity, making it difficult to talk about them in anything other than generalities. This is largely due to the differences between individual lenders.
At KeystoneAutoLoans.com, we work with lenders and dealers across the nation who regularly finance people with credit scores of 620 and lower. To get started, all you have to do is apply for financing online – no minimum credit score required! Once you hit submit, our system will go to work placing your application with a dealer or lender who can approve you for an auto loan despite your credit history.
What is a Low Credit Score?
A credit score of less than 620 is generally considered to be low. It may also be classified as high-risk, subprime, or just plain bad credit. People with those scores are considered to be at higher risk of defaulting on their outstanding debt. Most people consider low credit ratings to be deeply undesirable because they 1) preclude certain financing options, and 2) heighten the requirements needed to secure those options that remain available. Examples of events that contribute positively to credit ratings include simple things such as consistently making debt repayments on time and taking out a broad range of financial products. Similarly, events that contribute negatively include missing payments, past defaults, and loans being sent to collections.
In most cases, if a person has a low credit rating, then that person has little recourse for financing a vehicle through a traditional bank, credit union, or dealership. These lending institutions do not often approve auto loans with 600 credit scores and lower. No, they prefer borrowers to have high credit scores, and they often decline people with poor credit ratings out of hand. There are thing that such individuals can do to immediately boost their credit scores such as paying off their debt and asking their creditors to write off negative events on their credit rating reports. However, these efforts are usually not enough to raise their credit ratings to the extent necessary to secure anything other than an auto loan with low credit.
Low Credit Score Auto Loans: Terms & Rates
Most lenders who do approve these loans take extra precautions to protect their investments. For instance, they impose higher interest rates and stricter loan conditions. These protect them in the event that the borrower fails to make his or her payments. Such conditions differ from lender to lender but can include provisions such as shorter loan terms, bigger loan repayments, and bigger initial down payments on the automobiles purchased using the loans.
Furthermore, these “high risk” auto loans are almost certainly secured by the vehicle purchased using the loan, meaning that the purchased vehicle acts as collateral. This is similar to how houses are often collateral for home mortgages. Should the borrower default on their debt obligations, the lenders can use that clause to repossess and then sell the vehicle in question. Although vehicles are often used as collateral for all types of auto loans, lenders who finance bad credit are much more likely to come down on their customers if they miss even one payment.
Getting Approved for a Car Loan with Low Credit
Although auto loans with low credit scores are often less desirable due to the harsher restrictions, they are still useful to many people because they are so commonly available in comparison. They are often the only car financing option available for people with low credit ratings because most require little more than collateral and proof of employment/income on the part of their customers.
Using a service such as ours is especially beneficial under these circumstances. That’s because subprime auto loan lenders are basically a minority. If you just go out to local lending institutions – banks, credit unions, car dealers – chances are you won’t come across many willing to work with your credit. When you apply online through our service, however, we have lenders and dealers standing by who specialize in this type of auto lending.