What is a Sub-Prime Lender?

A lender that charges a finance rate that is higher than the "prime" rate offered by conventional lenders. Typically, it is a lender who approves loans for individuals who may have poor credit history or no credit history, or who have other characteristics (e.g. high LTV, property type, job) that justify a higher rate. A credit rating lower than 620 puts you in subprime territory. When seeking out a subprime lender, a couple of things should be kept in mind. Subprime lenders know that your credit situation does limit the choices you have, and they will often use this angle to push you into the highest rate possible acting as if you have no other option.

Prepayment penalties are often slipped in as well so you can't refinance to get a better rate in the future. In most states mortgage brokers don't have to be licensed. This means some of them have no idea what they are doing. Rates, fees and program guidelines are largely at the mercy of the Broker. This often means you wind up paying much more than you should. Not all subprime lenders are out to get you. There are many subprime lenders that really want to help people in tough credit situations. Research is vital. Get on the web and look into who the lender is and what they have to offer before you contact them. Using a lender that family or friends have had good business experiences with is also a good start to finding a credible one. However, being deemed subprime doesn't necessarily mean that your borrowing days are over.

There are plenty of credit grantors specializing in subprime lending who are eager and willing to loan money to those with bad credit. Naturally, though, there's a catch. The interest rates for subprime borrowers are frequently quite steep - significantly steeper than those paid by their more credit-worthy brethren. So, now that you understand what your playing field looks like, how can you finesse the game in a way that gets you a reasonably priced car loan? Here are a few tips: