“Subprime” doesn’t have to be a dirty word when it comes to taking out a car loan to buy a new or used car.
In a perfect world, everyone benefits from low interest rates on car loans. But for a large swath of the population, that’s not an option. Blame it on the effects on your finances of the Great Recession of 2008 or missteps in managing your money. Either way, a subprime credit score is not unusual.
“About 20 percent of all auto loans currently are subprime or deep subprime,” says Rick Finch, vice president and general manager at LendingTree Auto Division. “Subprime loans are growing, and auto is the fastest segment.”
Typically, you’re considered a subprime borrower if you have a credit score of 619 or lower, Finch says. That doesn’t preclude you from purchasing a car, but it will cost more because you’re a greater risk in the eyes of the lender.
While everyone has considerations to take into account when buying a car, subprime borrowers have to know a little more. From understanding the ultimate cost of the vehicle to knowing your ability to meet your payments, here’s a look at five things to ponder before taking out a subprime car loan.