What Is A Subprime Auto Loan?

What Is A Subprime Auto Loan?

Suppose you are in search of a used car for sale with low credit. In this case, you might find yourself getting turned away at dealerships. Getting turned away can feel frustrating at times, and it adds to the stress that comes with trying to find a car.

Fortunately, dealerships like USA-1’s buy here pay here car lot near Fort Wayne provide a solution for car buyers with low credit. This solution is accomplished using subprime auto loans, which are loans specifically for buyers with low credit. Before you take advantage of these loans, there are a few things you should first understand to use these loans effectively. Therefore, we at USA-1 have compiled a list below that gives five pieces of information about subprime auto loans and how they work.

1. Caters To Low-Credit BuyersThe first thing to understand is that dealerships like our buy here pay here car lot near Fort Wayne use subprime loans to cater to low-credit buyers. The term “subprime” also indicates a specific credit bracket, which is anyone with a credit score between 501-600. Therefore, anyone within this credit bracket that is searching for a used car for sale will utilize a subprime loan.

2. Determining EligibilityIf you visit USA-1’s buy here pay here car lot near Fort Wayne, or any other buy here pay here car lot, it is essential to know how they determine loan eligibility. Because they cater to low-credit buyers, buy here pay here dealers do not use credit to determine loan eligibility. Instead, they use other factors to decide how much you qualify for on a loan. These factors can be seen listed below:

• Debt-to-income Ratio
• Payment-to-income Ratio
• Living Situation

3. Impact On Your CreditAfter you understand how eligibility is determined, the next thing you should note is the impact a loan will have on your credit. Even though credit is not used to decide eligibility on used cars for sale with subprime loans, a subprime loan, along with any loan, will have an impact on your credit score. If you make payments on time, it will positively affect your credit. However, if you miss payments, it will negatively affect your credit score. Therefore, you should make payments on time to get out of a low credit situation.

4. Higher Interest RatesThe next to note about subprime auto loans is that the loan interest rates on used cars for sale near you will typically be higher than loans for higher credit scores. This is because low-credit dealers are taking a risk by lending to buyers with low-credit; therefore, they compensate for this risk by raising interest rates. Luckily, there are some things you could do to counter these interest rates, such as making a down payment, trading in an old car, or considering a co-signer.

5. Limited Selection Of Vehicles Based On EligibilityThe final thing you will usually see when visiting dealerships offering subprime loans is a limited selection of vehicles. This is because your eligibility determines which cars are available for you to buy. Despite this, you should still aim to find a dealership that sells the vehicles you want. For example, if you need to tow something, you should find buy here pay here dealerships specializing in used trucks for sale near you. On the other hand, if you need to transport your family, you should search for dealerships that have a lot of used SUVs for sale.

If you visit USA-1’s dealership to buy here pay here near Indiana, you will notice that we set ourselves apart from typical buy here pay here dealers with our expansive selection of used cars.