These days, people with less than stellar credit are fortunate to have access to a variety of financial products. One of the most popular has got to be the subprime auto loan.
Whether you’re in the market for a new or used vehicle, it’s important to be realistic about a couple of things. Here are some considerations to take into account before meeting with a lender.
Review your financial record
So you think you’ve got a poor credit record. However, that claim won’t be valid unless you have proof. Request a free report from any nationally recognized credit reporting bureau. Paid debts or erroneous information could still be on there. Check the report for discrepancies and dispute them.
The said report normally contains your current credit score. From this figure, you’ll be able to accurately place yourself in one of these categories.
- Nonprime – between 601 and 660
- Subprime – 501 and 600
- Deep subprime – below 500
The lower your credit score, the higher the annual interest. In 2004, the average interest rate for a subprime buyer was at 15.72 percent. Despite this, the subprime auto loan market is growing. Still, this development shouldn’t dictate one’s actions. If having to pay more than 10 percent per annum on a brand new SUV isn’t doable, then you should postpone taking out a loan until you’ve improved your credit score.
Know what you can’t afford
Sometimes, it’s better to put an emphasis on what you can’t afford. Being fully aware of your financial limitations makes you more conscious of how you spend the money you currently have. If you are in need of a vehicle but are on a tight budget, shopping for a used car makes much more sense.