Bad Credit Car LoanYou’ve just learned that your request for an auto loan with the Bank has been denied. The loan officer explains that the decision has to do with your credit. Banks lend only to prime borrowers; your credit situation places you squarely in non-prime territory.
Non-Prime. You’re not sure exactly what it means, but it sounds like a condemnation that will forever brand you as being somehow deficient to lenders.
However, being deemed Non-Prime doesn’t necessarily mean that your borrowing days are over. It may still be possible for you to get that sought-after car loan.
But first you need to understand the term that defines you. A Non-Prime borrower is one with No Credit or Bad Credit. Each lender has its own definition of what constitutes a Non-Prime borrower, but typically, a credit score of less than 620 lands you in this less-than-desirable category. For more information on credit scores, and what sort of factors cause them to suffer, please see Getting Credit in Canada .
There are four credit grantors specializing in Non-Prime lending who are eager and willing to loan money to those with bad credit. Naturally, though, there’s a catch. The interest rates for Non-Prime borrowers are frequently quite steep — significantly steeper than those paid by their more credit-worthy?
So, now that you understand what your options are here are a few tips:
* Check your credit report. Make sure that everything on your report is accurate; it could be that information has been entered in error, and that your credit history is a lot less blemished than you’ve been led to believe. If you do find information on your report that is inaccurate, you need to address it right away. Contact the credit bureaus in writing, listing your name and address and clearly detailing the nature of the error.
* Access your credit score. For a long time, credit scores were available only to prospective lenders, who used them to evaluate those seeking loans. That has changed; it’s now possible for consumers to access this all-important number. Your score is available online from the credit bureaus: Equifax. If you’ve got bad credit, it’s helpful to know it beforehand. Knowing your credit score will help give you a sense of exactly where you stand in your search for an auto loan.
* Don’t rely on the Dealers. Dealers take a cut of all car financing deals they land; as a result, any loan that they’re able to get you with a bank or financing company is likely to wind up being more costly to you than if you had contacted the lending institution on your own. Ideally, you’ll want to secure your auto loan before setting foot inside the dealership. Auto Source Financial can get you Pre-Qualified for your Vehicle Loan and help you find the Car you’re looking for at a far cheaper price.
* Shop around. Rates will vary from lender to lender; take the time to look around and see what deals are available. Lenders typically define their business according to credit tiers (A, A- and so on.); speak with loan officers regarding how each tier is linked to credit score and interest rate. Ask for a matrix detailing the tiers and their implications; having something in writing from each lender will make it easier to compare your options effectively. If you have a checking account, make sure to include your bank in your search for a loan. Many banks have entire departments dedicated to providing loans to those with flawed credit, and they tend to look more favourably upon applicants who are current clients. Your credit union is also a good place to turn. For years, credit unions have had a reputation of lending only to members with good credit, but that’s begun to change. Many are now beginning to expand their business to include those with less-than-perfect credit.
* Remember that your credit score is malleable and ever-changing. When it comes to your credit history, the ball is entirely in your court. You can improve your bad credit by paying your bills on time, and not overextending yourself when it comes to loans and credit cards. With proper attention paid to the state of your credit, you could conceivably hoist yourself out of Non-Prime territory in as few as two or three years. Going forward, check your credit score at least once annually. You may have to pay more than you’d like for the auto loan you’re about to receive, but in a couple of years, if your credit score has improved, you’ll probably be able to refinance your loan at a much lower rate.