Bad Credit Car Loans in NH

 


At AutoFair Honda, we want all of our customers to walk away with the transportation that they need, even those who are affected by a poor credit score. Our experienced financing team wants to help: they will talk with you and get to know your situation. Then they'll walk you through all of the options that you might qualify for.

Among these options will be subprime auto loans. This loan type can save the day for the car buyer with subpar credit, but the caveat is that it will carry a higher interest rate than a standard loan. To help you get a base understanding of how subprime auto loans work, here is a detailed look into what they actually are and what you should do if you are approved for one.

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Subprime Auto Loans: What Are They?

A subprime auto loan is a type of loan offered to those who have either limited or generally poor credit history. While there is no official cutoff score for prime (good credit) versus subprime, a FICO score below 620 is considered subprime. Dealing with people with lower credit scores represents more risk to the lender, and therefore they charge higher interest rates on these loans. The same goes for those who haven't yet established credit: because there's no history of that person paying their bills on time, the lender feels more secure handling that borrower carefully (by using subprime loan terms) until he or she establishes good credit and shows that they are less of a lending risk.

 

How Do They Work?

Depending on the subprime loan lender, interest rates will vary. Your financing specialist will help you weigh all of your options and guide you in your decision. When you need a car - and have your heart set on a particular model - it can be tempting to take the first offer you're approved for. But you should think it through and act carefully so that you don't commit yourself to years of potentially debilitating payments that are elevated by a high interest rate. And while APRs and subprime loans go hand in hand, there are some that can be more manageable than others.

 

What to Do Once You're Approved

Once you have an approval in hand and are confident that you can handle the monthly payments, then congratulations: you are on your way to enjoying your new set of wheels! The other benefit of a subprime auto loan is that you now have a way to improve your credit: it will rise, slowly but surely, as you keep making your payments on time. Of course, you still have to manage all other aspects of your credit by making sure every bill is paid - credit cards, installment loans, and other bills - on time and you don't open any new credit-based accounts (each new account that you open raises your debt-to-income ratio and lowers your credit score). Compare paying on time to the worst-case scenario: If you fail at making your car payments, your lender will arrange for your car to be repossessed. Not only will you lose your car, but your FICO score will plunge to a point that may be very difficult to recover from. So, work with your financing advisor, choose a vehicle you can afford, and make every payment on time. With that strategy, you'll be able to watch your score steadily rise as you enjoy driving your new car.


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