Tips for Getting a Non-Prime Car LoanSep 7th, 2015
Credit problems happen to the best of us, life can take a turn at the most inopportune moments. That’s where the non-prime lenders come in like TD Auto Finance and Scotiabank etc. The banks have specialized divisions with specific programs designed to offer financing to those of us who may not qualify for traditional “prime” loans.
There are things to consider when looking at these types of loans.
- REBUILDING CREDIT
One of the best ways to rebuild your credit is with an auto loan. Since auto loans tend to be larger purchases – lenders will look positively on your repayment history. Payment histories for this type of loan open doors for future borrowing options while getting you back on the road. Win-win.
- YOU NEED TO START REBUILDING YOUR CREDIT SOMEWHERE
Like any journey, you need to start somewhere – your credit won’t fix itself. Many customers today think that if they have a poor credit history that over time it will go away – off their credit report creating options for lower prime interest rates. Unfortunately, that’s just not the case. A lender looking at a blank credit report isn’t going to get the warm and fuzzies… “benefit of the doubt” is not in a lender’s vocabulary. The sooner you can start re-establishing your credit/repayment history – the faster you can get back to prime or near prime interest rates. Standing on the sidelines waiting for your poor credit history to go away only prolongs things. Start the journey now, get there sooner. Wait, and well… your journey takes that much longer.
- FOCUS ON BUDGET
It’s important for customers obtaining a non-prime auto loan to focus on setting a monthly budget – and staying within that budget rather than worrying about the interest rate. The higher interest rate is a direct reflection of the lenders risk to that customer. The sooner you start rebuilding your credit the sooner you can start driving down your interest rate for future loans.
- QUALITY AND RELIABILITY FIRST
It’s very important to consider a near-new used vehicle that will have the balance of manufacturer warranty along with manageable maintenance costs. This includes fuel to make sure the vehicle remains affordable after delivery. Older, high end luxury vehicles end up costing you thousands of dollars each year to maintain are counter-productive with non-prime loans.
- MOST NON-PRIME LOANS ARE OPEN
Most of the lenders for non-prime auto loans will provide the customer with an open loan allowing you to pay down the loan faster which will reduce your overall cost of borrowing. Be sure to ask this question before you purchase your vehicle and have the sales consultant or financial services manager provide you the support documents to confirm. It’s your money, be smart and safe with it.
- REMEMBER THIS IS NOT YOUR FOREVER LOAN
When acquiring your non-prime auto loan it’s very important to stay within your budget and obtain a safe and reliable vehicle because this is the start of your credit rebuild process. Some lenders have a credit rebuild program where after 12 months you can trade in your vehicle and obtain a much lower interest rate providing you have a solid repayment history with them. So it’s important to keep in mind that this is not your “forever loan” – it’s a stepping stone along your journey.
Best of luck and feel free to reach out if you have any questions!
James Morgan, NewRoads Financial