Bad Credit Auto Loans and Sub-Prime Lending, How They Work


You would not go to the local museum aquarium to learn how to cook fish. So, why go to a car dealer to get the best deal on a loan? Auto dealers exist to sell cars; financing is a side-line for them and they are not experts at reeling in the best deal for you. In fact, their lending practices are so short-sighted and restricted; do not feel bad if they turn you down.

Dealer Financing Facts

Auto dealers do indeed have so-called financing departments, but they work with a few established lenders simply to provide a convenience to some of their customers. Yes, they do make some extra cash in the form of bonuses and incentives from a few lenders, but they do not exert a lot of extra effort or provide many options to their car-buying customers. Once turned down by a dealer, a lot of customers with poor credit make the mistake of going to another dealer hoping for approval. Big, big mistake. They are going to get the same results. And, what is more, their credit ratings will take dings from each credit query from each dealership, further damaging an already poor rating. So called hard credit queries, caused by going from lender to lender, are treated by credit agencies much as drug-seekers who go from doctor to doctor seeking prescription narcotics.

Optional Auto Loan Lenders

The smart shopper with a poor credit rating will pull their own credit report to know where they stand. Knowing the credit score and calling a few dealers will substantiate whether or not a car shopper has the scores to rate approval at a dealership. Once that is established, it is time for them to start considering options. The smart auto loan shopper should seek out lenders or brokerages who work with poor credit buyers to secure auto loans.

Online Is So Fine

Many lenders of these type are available online, thereby offering great convenience in the form of easy online applications, rapid processing, and a surprisingly individual approach; all of which make for easy approval for a large number of poor credit auto loans. Most online brokers have a large school of participating bad credit auto loan lenders and they can cast their nets wide to find a loan that is almost tailor made for each poor credit auto loan client.

Online Lenders Great for Poor-Credit Borrowers

Questioning whether or not lending companies of these types are any good, in the face of the belief that traditional financers have greater financing abilities, is rather silly. The bottom line is that online lenders that operate in poor credit markets have far greater options to present to their clients than do traditional lenders. For one thing, online lenders have lower operating costs. And they have far greater flexibility than the shareholders at traditional lenders allow their loan officers.

Lenders Make Money, Clients Drive, Credit Scores Improve

Indeed, the non-traditional lenders are in the business to make money on sub-prime loans, but they are willing to take the risk to put those with poor credit scores in vehicles they want or need. Some of this money, of course, comes in the form of higher interest rates, but that is the weight a poor credit borrower must bear. At least they are there to help. Another good aspect of dealing with these non-traditional sub-prime lenders, is that the poor credit borrower can, by making timely payments, eventually improve their credit scores by a great many points. So, there is a little pain for the gain; but poor credit borrowers can look to the future while they have the wheels they need.

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