Those car shoppers with poor credit scores may have another avenue in addition to a car loan by which they can reestablish their credit.
What we know

At Auto Credit Express we've spent the past twenty years helping consumers with questionable credit searching for online auto loans find those new car dealers that can offer them their best opportunities for an approval.

But other than an auto loan from a high-risk lender in some cases people with blemished credit have another option they can explore in the pursuit of better FICO scores, courtesy of the internet, called peer to peer lending.

Credit scores and lender risk

Peer to peer lending got its start for reasons similar to those of higher-risk auto loans: for many people with less-than-stellar credit, typical credit scores don't always reflect that person's true risk or ability to pay back a loan.

Traditionally, other than the subprime auto sector the only lenders willing to work with these consumers were credit card companies able to charge exorbitant fees on top of high interest rates and payday loan centers that, in most states, get away with hammering their borrowers with annualized interest rates that can reach 400 percent or more.

Conversely, peer to peer sites say they are able to loan funds at lower rates by putting borrowers directly in touch with investors willing to lend thereby eliminating a layer of bureaucracy and cutting down on overhead costs. These sites like to point out that this makes it cheaper to extend credit to higher-risk borrowers. More importantly, they also state that the peer-to-peer evaluation process is more suitable to judging someone's creditworthiness than just looking at credit scores – allowing many applicants with situational bad credit to obtain unsecured loans.

Interest rates

As of this writing, interest rates on these loans from one of these sites,, range from a low of 6.38 percent to as high as 35.36 percent and are based on a "Prosper Rating" between AA (the highest and best) to HR (the lowest and worst). In addition, interest rates rise as the loan term increases (standard terms typically include 1, 3 and 5 year loans).

Investors, for their part, can choose the type of borrowers they'd prefer to deal with, although they're not allowed to set the interest rate. Also, unlike a bank, lending sites such as Prosper give investors the choice of the risk level they're willing to take (higher-risk loans are often funded by more than one lender) and give those choosing more risk the possibility of a greater return on their investment.

Finally, in most cases people who have borrowed through one of these sites and paid back the loan in a timely fashion will receive a lower interest rate for a second or third loan.

The peer to peer loan procedure

According to the Prosper site, "To get a loan, you create an account along with a listing for your desired loan. You tell everybody how much you'd like to borrow, and you let them know what you intend to use the funds for. You also pick a maximum interest rate that you are willing to pay."

The Bottom Line

While a peer to peer loan probably will not help reestablish your car credit unless you plan on using it to finance an entire vehicle (borrowing money for a down payment is illegal), it's certainly a great way to pay off high-interest credit card debt and a much better alternative for cash-strapped consumers than a payday lender. It's also a great way to improve your credit scores.

One more thing: for consumers wishing to reestablish their car credit, Auto Credit Express matches applicants to those franchised new car dealers that can give them their best chances for auto loan approvals.

So if you're ready to reestablish your auto credit, you can begin now by filling out our online application.