Auto Loan Financing Expands With More Options For Low Credit Scores
Getting auto financing with a bad credit history can be difficult, but there are more options now than ever before.
According to auto loan service provider Innovative Finance, auto loans have become an increasingly popular way of getting the car you want without digging yourself into a deeper financial hole. In fact, one of their surveys showed that over 75% of those who have cars with less than perfect credit actually got auto loans from traditional sources such as banks, finance companies, and auto dealerships.
More Borrowers with Low Credit Scores and Bad Credit Histories Now Qualify For Auto Loans
In another auto loan industry survey. Innovative Finance asked auto finance providers what percentage of their auto funding is going to borrowers with poor credit, i.e., bad or worse, which it defined as below 500 (on the FICO scale). The auto loan provider executives said that in 2013 about 30% of auto loans were for customers with low credit scores and bad credit histories; however, this year over 55% of auto loans are now going to people who have trouble making timely payments on previous debts or who even may have filed for bankruptcy recently.
One reason why more car buyers with less than perfect credit scores can secure auto loans now is that lenders are relaxing some of their qualifications criteria, especially when they see that there's a growing market for auto financing. Not only are auto lenders seeing more demand from bad credit auto loan borrowers, but they are also finding that auto loans work out to be less risky than in the past because there are now longer terms and lower down payments involved in car purchase contracts.
It's likely that auto loans have expanded in scope thanks to online auto loan providers who used technology to streamline their operations - which made it easier for even low credit score borrowers to get auto loans.
Auto Loans Can Be Approached Differently with Innovative Processes
The biggest problem when getting an auto loan is being turned down by numerous banks or dealerships before you finally get accepted for a car loan - which can take weeks or months if you have poor credit scores. This auto loan process can be frustrating and discouraging.
However, for some borrowers with low credit scores, car buyers do not have to be like this at all if you approach the auto financing process with an understanding of how lenders think about such car loans. One way that might work is to call a car dealer who specializes in auto loans for people with low scores and bad credit histories. You could also find auto finance companies online who may work out flexible auto financing terms for those with low scores and imperfect credit histories - but keep in mind that you will still need to present good reasons why you need auto financing now even though there's little or no money down involved in your purchase contract.
The worst thing that can happen is if you go without a car because you don't want to take on auto financing from a dealership or bank that requires a good credit score for auto loans. It's not impossible to get auto loans with bad credit scores, and you can improve your chances of getting a car loan if you know what's required by auto lenders before you walk into a dealership or apply online for auto financing.