Good, 670-739: This segment covers 21 percent of borrowers, and Experian says only 8 percent of the group is likely to become seriously delinquent on payments.
“The sad reality is that if you’re a subprime buyer, you’re going to pay more interest than someone with a good credit score,” says Matt DeLorenzo, managing editor at Kelley Blue Book.
How to Save Money
In conversations with lending-industry experts, CR found that there are a number of ways to save money, even if you have a suboptimal credit score.
Know your credit score. That way, you’ll know where you stand so that you can manage expectations regarding loan eligibility, and be aware of what you have to do to bring up your score. You should also look for errors in your credit report, which can affect your score, Bell says.
“Luckily there is no shortage of sites you can visit online to get a free credit score,” says Nana-Sinkam. “All the major credit bureaus offer one free credit report annually.”
If there’s time, improve your score. A credit score can be improved in a number of ways, mostly by paying bills on time. Always pay credit card and other bills when they’re due, even if it’s only the minimum payment. This is good advice for any loan-the more you pay up front, the less you’ll pay in the long run.
Bring a bigger down payment. “Having a bigger down payment reduces the amount of loan you need, and a smaller loan means less interest,” says Amy Wang, associate director of Credit Karma Auto. “A down payment can be in the form of cash, a trade-in vehicle, or a combination of the two.”
Get prequalified. Much like knowing your credit score, getting prequalified for a loan from your bank helps manage expectations about what’s possible.
Talk to your financial institution and see what’s available. Nana-Sinkam says that before you get prequalified, it’s a good idea to review your credit report to see whether there are any disputable items. Every little bit helps, and just a few corrections can get you a better rate. Getting approved for a loan before you go to buy a car gives you yet another bargaining chip.
“Have a rate you can take to the dealer to see if they can beat it,” says DeLorenzo. “The dealers s that can get payday loans for poor credit Portland subprime borrowers a better rate.”
See what the dealer’s manufacturer is offering. If you’re in the market for a new vehicle, manufacturers such as Chrysler, Hyundai, and Kia often have programs for subprime borrowers, says DeLorenzo. You have to dig around on their websites to see what’s out there, and keep in mind that this type of deal is going to be found on less-expensive cars.
“Most of the subprime lending you’ll see is on entry-level and economy cars-the bottom end of the product lineup,” he says. “I don’t think any manufacturer wants to leverage a subprime buyer into a high-margin vehicle like a luxury car or a pickup truck.”
Poor, 300-579: Only 16 percent of borrowers are in the deep subprime category, which carries the likelihood of extra fees, deposits, or loan application rejections
Consider buying a used vehicle. In general, used cars cost less money, and the value of a used car is more likely to stay stable for longer than a new car, which will depreciate rapidly. That means used-car transactions pose less risk for the lender, and there is a higher likelihood that a subprime borrower will be approved for a loan.
