Last week, Experian released its latest credit trends report, which revealed an increase in the number of bad credit auto financing accounts opened. Anyone considered a candidate for subprime car lending should understand what is going on in the market.
This helps them know what their chances are of qualifying for a vehicle loan and what the cost will be.
According to Experian, lenders increased their willingness to take on risk during the second quarter. Compared to last year, subprime loans for new vehicles increased 22.4 percent. During the second quarter this year, subprime, deep subprime, and nonprime customers represented 22.29 percent of all new car loans.
Surprisingly, the largest increase was experienced in the worst-credit category. A jump of 44.1 percent occurred for deep subprime borrowers. During second quarter 2010, these individuals represented only 1.48 percent of all new auto loans.
By second quarter this year, the figure stood at 2.13 percent. This is good news for the most credit-challenged car buyers because it means they have a greater chance of being approved for bad credit auto financing.
During the economic crisis, bad credit car loans took a major hit and may still be recovering. To take advantage of this trend, car buyers with bad credit should do a few things. They should request their FICO scores and credit reports from each credit bureau.
An explanation should be prepared regarding any negative marks because lenders may inquire about these.
Once a car buyer is approved for a loan, a car that features a monthly payment of no more than ten or 15 percent of gross monthly income should be found. Borrowers should offer a trade containing substantial equity or be prepared to make a large cash down payment.
Putting down 15 percent or more, excluding dealer cash and rebates, should increase the chance of approval.
