While it helps to have a credit score in the good to excellent range, it doesn’t mean you’re automatically disqualified from being able to take out a car loan if your credit is less than perfect.
How Does a Car Loan Build Credit?
When your credit is less than stellar, you’ll find it harder to get the financing you need for a car. Many consumers think applying for a credit card will help them boost their credit score. While this definitely can, know that there are other ways to build credit. Credit cards are considered revolving credit, where you’re only required to pay the minimum amount each month and can roll over the balance. On the flip side, car loans are a type of installment credit where you agree to pay back the amount borrowed with payments over a set amount of time.
Both are great credit builders, but some consumers may find taking out a credit card to be too tempting with the roll over option. So, if someone is looking to kill two birds with one stone, taking out a subprime auto loan can really help them establish good credit. Different from a traditional auto loan, subprime car loans are designed for buyers dealing with bad credit or little to no credit, but they aren’t available at every dealership.
Are There Any Drawbacks?
No car loan is perfect, so you can expect there to be some drawbacks. There are two major ones you need to keep in mind for a subprime loan:
- You must keep up with the loan – If you miss any payments, your lender will typically report this to the credit bureaus. Make sure you’re financially ready to take out a car loan because any missed payment can bring your credit score down, leaving you right where you started.
- Higher interest rates – The biggest drawback is the interest rate. With a bad credit car loan comes a higher than average interest rate. At the same time, you may be able to refinance for a better rate once your credit improves.
Don’t Hesitate, Start Today!
At Auto Credit Express, we’re the place where you begin your journey toward finding a dealer. So, don’t let your bad credit get in the way of buying a car. You don’t need perfect credit with our nationwide network of special finance dealers that know how to handle unique credit situations. We want to get you connected with one of them. Fill out our no cost auto loan request form to start today.