Secondary Auto Financing
For individuals with poor credit, secondary auto financing can make purchasing a vehicle a reality. In most cases, the interest rates that are charged will be higher than those offered with traditional loans. The reason for the higher rate is the perceived greater risk that an individual with a bad credit history presents. In addition to higher interest rates, secondary auto financing may also mean that there are additional requirements mandated by the lender. These additional requirements could include a down payment or a minimum amount of income coming in each month. A history of timely payments for rent or mortgage may also be a requirement. The good news is that the potential buyer can use these loans as a means of rebuilding their credit. By making loan payments on a regular basis, a buyer can see their credit score improve. As the credit score improves, the consumer has the option of refinancing later at a lower rate. Any consumer who wishes to rebuild their credit would be wise to do so. The Bible talks about the wisdom of turning to God. "But whoso hearkeneth unto me shall dwell safely, and shall be quiet from fear of evil." (Proverbs 1:33)
Any potential buyer who finds themselves coping with a low credit score faces a number of dilemmas. If they wish to purchase a home or an automobile, they will face obstacles that buyers with high or average credit scores will not have to deal with. It can take years to leave a poor credit history behind. In the meantime, there are constructive steps that potential buyers can take to elevate their credit scores and get back on track. Some lenders specialize in loans that can provide an answer to this dilemma. Of course these loans may come with a price, usually in the form of a higher interest rate. Some of the rates that are offered can be considerably higher than the rates that are offered to consumers with healthy credit histories. A potential buyer who is in the market for an automobile can turn to secondary auto financing when a new car is needed. Individuals with poor credit are not the only ones who can benefit from this type of financing. Many first time car purchases are made by buyers whose credit history is not poor, but non existent. A student who has just graduated and is about to start their first job may not have established much in the way of a credit history. The answer for these individuals may be found in secondary auto financing.
Credit scores generally range anywhere from 300 to 900. Obviously, the higher the score that a buyer can claim, the better credit they have and the lower the risk that a lender is assuming when granting a loan to a potential buyer. Generally, anyone with a credit score of 620 or lower will find themselves in the poor credit category. The option of secondary auto financing is generally geared toward buyers who have a credit score in this range. Usually, both new and used vehicles can be purchased with this type of financing. The make and model of car is also not an issue in most cases. Both commercial and personal vehicles can be purchased as well. The age and mileage of a used vehicle can be determining factors, however. It is generally harder to finance an older, high mileage vehicle since the vehicle itself will sometimes serve as the collateral for the loan. If a potential buyer can obtain a co-signer, this can also increase the probability of approval.
Along with the credit score, issues such as debt to income ratios, amount of money in a checking or savings account, and work history can be important determining factors in obtaining secondary auto financing. In general, interest rates are determined by the amount of assumed risk that a lending institution is taking on when granting a loan. For this reason, down payments or some kind of trade in that is being offered when a vehicle is purchased can help to get the consumer obtain better terms on any potential loan. The down side for buyers with a poor credit history is that they may end up paying more than the actual value of the vehicle when it's all said and done. If a consumer can use secondary auto financing to help rebuild their credit, they may decide that the extra expense is worth it. Debt to income ratio is an important concern because this factor establishes how much additional debt someone can handle. Another important factor is the amount of time a potential buyer has spent on their current job. A longer period of time on the job can indicate stability and credibility. Repossession of a vehicle is not a good outcome for either the lender or the consumer. For this reason, all of these factors are carefully considered before loan approval will be granted.
Whether or not a consumer chooses to utilize the option of secondary auto financing, there are certain things to remember when making an automobile purchase. Any used car should be checked out by a reputable mechanic before it is purchased. It is also relatively simple to run a vehicle history report that will uncover any issues that the car may have that are not readily obvious. These issues could include a prior wreck or natural disaster such as flooding that may have impacted the vehicle as well as any complications with the title.