Oct 2nd, 2007 by Frank Mangano
Subprime loans are showing up in the news everyday lately with the credit crunch all around us. When your looking for an auto loan it is important to understand where your credit is and if you fall into this category. Being in this category usually means you have had some issues with credit in the past, and to close the deal on a new car you will be paying a higher interest rate than someone considered in the “prime” category. In addition, many lenders may require you to place a larger down payment. Since someone with a lower credit score is considered riskier for the lender, they tend to look to minimize their risk by asking for more cash up front. You also will find you will have less choices as to the programs available to you from your lender, or a new car dealer.
So keep in mind, if your credit score puts you in this category be carefull to read the fine print on any loan papers, compare your interest rate carefully so you don’t pay any more than you need to. Being a subprime borrower is not the end of the world, but if you ask a dealer what your interest rate would be if you had a better credit score, you might learn how valuable it really is to manger your credit better.