Is your credit score making it nearly impossible to buy a vehicle? A low credit score or a limited credit history can make the already stressful process of purchasing a vehicle even more grueling. Not only are you faced with finding a reliable car at a fair price, but you’re tasked with finding a lender willing to approve the automotive loan. It’s the perfect recipe for stress and buyer’s remorse, but it doesn’t have to be.
We are proud to offer a solution, providing bad credit car loans near Bennington to ensure our customers never have to compromise or settle for less when they get in the driver’s seat. As veterans in the automotive industry, we realize that financial struggles can affect anyone, but we don’t believe that should define your future behind the wheel. Instead, we want to help every customer break the cycle by qualifying for a bad credit car loan that sets them up for financial success.
So, how do we do it? Is a bad credit car loan too good to be true? We’re here with those answers as we look closer at the different types of car loans, specifically what differentiates a bad credit car loan from a conventional automotive loan.
Understanding the Fluidity of Your Credit Score
Before we discuss the different types of bad credit car loans, it’s critical to understand the fluidity of your credit score. Every Bennington driver who walks through our doors knows their credit score is a three-digit number that will follow them throughout their adult lives. However, many are surprised to learn that the number is fluid or frequently fluctuates and is evaluated differently by each lender.
The three major credit bureaus–TransUnion, Experian, and Equifax–offer general guidelines on how credit scores are evaluated and categorized. For example, every credit score is determined based on factors like payment history, types of credit, and length of credit history. These factors carry different weights, with your payment history making the most significant impact. Because of this, it’s easy to see why a string of late payments can negatively impact your score.
But what do we mean by a fluid credit score? There isn’t an industry-wide standard that determines how credit scores are classified since every credit bureau and lender uses different guidelines or scoring models. For example, your bank in Bennington may require a credit score of 670 to qualify for a conventional automotive loan, but another financial institution requires a score of 700. According to FICO, a score of 670 and 700 is considered “good,” with both qualifying for prime (conventional) loans using the VantageScore guidelines. That leads to the next question, “What are prime and subprime loans?”
Prime or Subprime: What’s the Difference?
Even though there isn’t an industry-wide scoring system for credit scores, automotive loans generally fall into two broad categories–prime and subprime loans. Prime loans are conventional automotive loans typically available to Bennington drivers with FICO credit scores above 660. Super prime loans fall in this category and are generally available to those with FICO scores of 720 or higher. But why are these loans so attractive? How are they different from subprime loans?
Prime loans reward individuals with higher credit scores by offering lower interest rates. The interest rate is how much the borrower or lender charges for the loan. In other words, it’s money you’re paying in addition to the “IOU.” Ideally, you want to pay as little interest as possible. Lenders acknowledge as much and determine the risk of defaulting on the loan based on your credit score: the higher the number, the more likely you are to repay the loan. By posing less of a risk, you pay a lower interest rate.
Subprime Loans: Different Types
While prime loans are the ultimate goal for every Bennington driver, not everyone meets the high standards set by these lenders. For example, lenders that offer prime loans often have tunnel vision and only look at your credit score to determine your creditworthiness. They don’t account for the big picture, such as a recent divorce that caused a few financial setbacks or a string of late payments caused by a brief period of unemployment. The stringent requirements make it impossible for many Bennington drivers to qualify for a conventional or prime automotive loan.
Subprime loans are an outstanding alternative with many benefits. These loans generally fall into two categories–subprime and deep subprime. Bennington drivers with FICO scores between 580 and 619 typically qualify for subprime loans, while those with FICO scores below 580 are often eligible for a deep subprime loan. The biggest difference between these loans is the interest rate, which reflects your credit score and the associated risk. For example, a deep subprime loan will have a higher interest rate because the lender assumes greater risk based on your credit history.
Setting Yourself Up for Financial Success
Subprime loans are an excellent way to set yourself up for financial success without compromising your experience in the driver’s seat. How so? Think about the traditional car-buying process and the steps to rebuild or establish your credit history. You need a job to earn a paycheck and prove your creditworthiness, but that job requires having reliable transportation to manage your commute. You can’t get to work without a vehicle, risking your paycheck and the likelihood of establishing solid financial footing. It’s a vicious cycle that we’re happy to help our Bennington customers break.
Ask the Right Questions
First and foremost, breaking the cycle of bad credit begins with asking the right questions. By offering bad credit car loans near Bennington, we give more drivers the opportunity to reestablish their financial footing. For example, many bad credit car loans are advertised as buy here, pay here dealerships. However, these dealerships don’t operate like traditional lenders and report your monthly loan payments to the major credit bureaus. Why is this critical?
As a subprime borrower, your loan should have the potential to positively impact your credit score. By reporting your monthly loan payments to the credit bureaus, your subprime loan can do precisely that. Moreover, each monthly payment helps reestablish your creditworthiness and builds equity in your vehicle, making it critical to ask your subprime lender the right questions before you finalize the sale.
Don’t Be Afraid to Think Outside the Box
One of the most significant ways we help our Bennington customers is by redefining the dealership experience and encouraging you to think outside the box. Most customers expect to shop our lot for the right car, truck, or SUV, negotiating the price before finalizing the sale. However, we find that our subprime borrowers benefit from a different approach that gives you all the tools you need to shop with confidence. In most cases, this means flipping the process and looking at your financial situation first, determining your subprime loan needs, and shopping based on your budget and financial situation. It’s the best way to set you up for financial success without asking you to settle for less in your next vehicle.
Commit to Your Future in the Driver’s Seat
Subprime automotive loans are often considered less-than-ideal alternatives to a prime or conventional automotive loan. However, you should never discount their benefits if you’re in a position with a limited credit history or a low credit score. In these instances, a subprime or bad credit car loan can be the saving grace you need to get behind the wheel and back on the road.
We’re privileged to extend that opportunity to our Bennington customers by offering some of the best bad credit car loans in the region. Our team recognizes the stress of buying a vehicle, especially if your credit score needs work. Because of this, we work diligently to equip every customer with the tools they need to make an informed purchase, from understanding the different types of bad credit car loans to the fluidity of their credit scores. It’s our way of arming you with the information you need to commit to your future in the driver’s seat.