Consumer Car Buying Advice Blog

The latest securitization by bad credit auto lender AmeriCredit signals that the tight credit market may be easing.

Latest report

At Auto Credit Express, we see that subprime lender Americredit has just announced the pricing of a $600 million offering of automobile receivables-backed securities. AmeriCredit will use the net proceeds from this securitization transaction to provide long-term financing of its receivables – meaning it will give the company the cash that it needs to continue its business of lending money to credit-challenged consumers.

Wall Street Journal comments

According to the Wall Street Journal, “AmeriCredit Corp.’s (ACF) auto loan-backed deal has been increased in size and has launched, according to a term sheet. The deal is now $600 million, up from an original $500 million.” The Journal goes on to state that “Having a healthy asset-backed market is important as it eases the flow of credit and helps lower the cost of borrowing for consumers.”

This is definitely good news for credit-challenged consumers, as it signals that the lending market may finally be stabilizing. This means that bad credit consumers may finally begin to see more approvals from lenders as the pool of money these lenders are able to loan from grows.

Not the good old days

At the same time, a recent Experian Automotive report  stated that although company sees the growth rate for 30-day loan delinquencies slowing, “average credit scores for new and used vehicle loans (are) rising, (while)loan terms (are) shortening.”

With average credit scores rising and loan terms shortening, this means that even though the market may be stabilizing, lenders are still concerned about the loan market, in general, and are requiring higher credit scores, while limiting their exposure by shortening loan terms. This is also a trend that has been continuing in the bad credit car loan sector, as well.

In a nutshell

The bottom line to all this news is that lenders are still looking to minimize their risks by requiring higher FICO scores and reducing loan terms. When compared with the car loan market two years ago, consumers with a given credit score will still be paying a higher rate of interest and will be asked to reduce the term of their loans.

At Auto Credit Express, our advice to consumers seeking bad credit car loans hasn’t changed since the beginning of the current economic recession:

•    Know your credit score and what’s contained in your credit report
•    Plan on coming into the loan with at least 10 percent down in cash or trade equity
•    Keep the loan term as short as possible
•    Buy a compact of midsize vehicle and put off looking at your dream car until after you’ve reestablished your credit.

About Auto Credit Express

For nearly 20 years, Auto Credit Express has been helping people with credit problems get approved for new and used car loans. Since our inception, we have processed over 2,000,000 online bad credit auto loans and our dealers have closed over 1 billion dollars in auto loans.

For more information, please visit www.autocreditexpress.com to see what we can do for you.

Tags: americredit, bad credit, bad credit car loan, car loan, credit, credit score, experian, experian automotive, fico, Fico Score, subprime, wall street journal

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