How Do Subprime Car Loans Work?
Shopping for a new vehicle can be a lot of fun, but it can also get confusing very fast. Customers have the opportunity to browse through a handful of different vehicles and even take them for the occasional test drive. However, once it comes to figuring out the financing side of things, some may find the task quite daunting, especially if the potential buyer has a less-than-perfect credit score. A person’s financial history or mistakes they’ve made in the past shouldn’t hinder their ability to purchase a vehicle. Everyone deserves a safe and reliable form of transportation and a subprime auto loan can be exactly what a customer needs to secure a vehicle. Continue reading as our finance specialists at Auto Depot Sudbury have outlined general information, misconceptions and the options customers have when applying for a subprime loan.
What is a Subprime Car Loan?
Auto loans are generally divided into two main categories, Prime and Subprime. Prime loans are typically lower interest loans that are provided to individuals with credit scores above 700. On the other hand, subprime loans are a financing tool for people with credit scores between 580 and 669. In general, subprime loans are higher interest loans as people with lower credit scores are viewed by lenders as higher risk customers. Subprime auto loans are similar to prime loans as they are both forms of secured debt where the vehicle being purchased is used as collateral.
Are Subprime Car Loans Bad for Buyers?
Subprime loans are designed for individuals who may need some additional assistance in building or rebuilding their credit history. As previously mentioned, a person’s turbulent financial past should not restrict them to having access to safe and reliable means of personal transportation. A great way to rebuild credit is by applying for a car loan and ensuring that payments are made on time. It’s true that the higher interest rates of subprime loans might initially be slightly more expensive for buyers, however, it may prove to be advantageous in the long run. A few reasons to consider applying for a subprime loan include:
- Availability of considerably high loan values
- Higher amount of lender competition for subprime loans
- Lower monthly payments as a result of longer term periods
- More flexible options than large banks or credit unions
Subprime Loans Refinancing in Canada
An important thing to remember is that customers aren’t fully obligated to high interest rate subprime auto loans. All auto loans in Canada are open loans, meaning that customers are able to pay off large lump sums of their loan at any time. By doing so, customers are able to reduce the amount of money that they are paying towards the interest of the loan. Some people might also be able to refinance their loan, getting themselves a break on interest payments. Your loan’s current holder might be able to accommodate you, but refinancing is a great opportunity to shop around for a better deal.
Auto Depot Sudbury is the perfect place for drivers in and near Sudbury, Ontario to trade in their vehicle. Wondering how much your vehicle is worth? Visit our online trade appraisal page and submit your vehicle’s information through our secure form. One of our team members will reach out to you with a fair appraisal of its overall value. Have any questions you’d like to speak with our team about? Give us a call at (705) 673 - 6079 or send us a message right here online.