According to the latest FICO survey over a third of the bankers polled believe the number of car loan delinquencies will increase.
Car Loans with Poor Credit
Here at Auto Credit Express we're familiar with most of the issues faced by car buyers with problem credit. At the same time, we feel that it's important that potential applicants understand the general state of the lending market as this may help them make a decision on when might be a good time to visit a bad credit auto dealer, and when it might not.
In this case, we're talking about a survey conducted four times a year and sponsored by FICO that shows what executives in the lending industry predict for the next six months as well as the impact of current events on their field.
2014 PRMIA First Quarter Survey
A recent survey of bank risk professionals that was conducted for FICO by the Professional Risk Managers' International Association (in collaboration with the Columbia Business School's Center for Decision Sciences) came up with the following findings relating to car loans:
- The first quarter of 2014 market the fourth consecutive quarter in which more risk managers expect to see an increase in the total number of auto loan delinquencies – the highest level since the fourth quarter of 2011.
- When asked about the level of auto loan delinquencies, most felt the level would either stay the same or decrease (64.8%, down from 77.2% in Q4 2013).
What this means
In our opinion, the increased possibility of auto loan delinquencies, especially in the subprime sector, could signal the possibility of a tightening of lending down the road from higher-risk lenders.
Despite the potential of this happening, there are a number of things consumers with imperfect credit can do to increase their chances of a car loan approval, including:
Down payment – The higher the actual cash down payment is, the better the chances for an approval. Even if the vehicle you are considering has a hefty rebate, subprime lenders still expect owner equity, so meeting or exceeding their requirements will help your cause.
Trade in - If your trade in is worth less than the payoff amount, be sure you have the money to cover the deficiency. Even in the best of times these lenders don't like negative equity.
Income - Be sure that you have enough income to cover the payment plus the car insurance premium. Subprime lenders will require proof of income in the form of payroll check stubs and W-2 forms. For those needing help, our web site has calculators that can walk you through the process of determining your financial eligibility for a car loan.
The Bottom Line
The latest survey of bank risk managers shows there's a bit of caution in the car loan sector. To better their chances of an approval, consumers with past credit issues need to make sure they have a down payment and, if a trade in is involved, any negative equity is offset by cash.
One more thing: Auto Credit Express matches applicants with credit issues to those dealers that can offer them their best opportunities for car loan approvals.
So if you're ready to initiate the process, you can begin now by filling out our online auto loan application.