If You Have Auto Loans With Bad Credit History Go For Online Dealers

A good car loan and bad credit have long been thought about as opposites. That‘s because most people have learned through experience that the best car loans go to those with good or excellent credit. Certainly to those with a FICO score of over 640. Most applicants with a FICO score under 640 have to take what are referred to as subprime car loans. These are loans that have been designed for those who are credit challenged. What makes them different? There are several things:

   1. Interest rates

Interest rates on subprime car loans are significantly higher than on prime or near prime loans. Sometimes, depending on the credit score, they aren’t a great deal higher but then they can also run as high as 25 to 30%

   1. Loan term

Subprime loan terms are generally shorter. They can be generally 3 to 5 years. Not nearly as many subprime car loans are 72 months when compared to car loans generally.

   1. Loan Conditions

The provisions for default and repossession of the car are much stricter in subprime car loans. They often offer less “grace period” before a payment is considered late. Overall the loan is “tougher” than general car loans.

There are some loans that are outside of these guidelines. One is student auto loans. Depending on a number of factors, a student may qualify for a prime auto loan or also due to circumstances can be subprime. It’s something that has to be determined on a case by case basis.
If you’ve had auto loans with bad credit history, you may have to resort to a “buy here / pay here” car lot. In this situation you are in the worst of worst situations! These will be the oldest cars in the poorest mechanical condition of all cars for sale in the retail market. If you find yourself in this situation due to auto loans with bad credit history, rather than get discouraged, take this as a wakeup call to get serious about taking steps to improve your credit to get back into subprime car loans or even better to prime car loans and off the “buy here/pay here” lot!