Sub prime auto financing is categorized that way in order to separate it from “prime” auto financing. Qualifying as sub prime borrower simply means that your credit score is bad and that lenders see you as a lending risk. This is not a death sentence, but it does put your in a bad position when you go to get a car loan.
Here’s the scoop, there lenders that specialize in sub prime auto financing so you will have options. The problem is that because you have bad credit you will be required to pay a higher interest rate than borrowers with good or excellent credit ratings. So now that you recognize your problem you need to take steps to solve it.
Start by:
- Getting your credit report: see where you made mistakes (check for credit reporting agency errors too)
- Then get your credit score: find out how bad the situation really is
- Then do your homework and shop around: do not rely on the dealership where you plan to buy your car to offer you a deal, examine a lot of sub prime lenders and choose the best
Knowing all this information and going into a dealership armed with a couple other financing offers will put you in a much better position than simply relying on the dealership to provide you with financing.
Sub prime auto financing is not an ideal scenario for anyone. However, if you recognize how you got in the position to be labelled a sub prime borrower, and then become proactive in making your car payments on time in addition to timely payments on other loans and financial obligations, you credit score will soon improve. Hopefully, then you will not have to worry about obtaining sub prime auto financing again.