A subprime auto loan is a type of loan used to buy a car, truck, or SUV that’s offered to people with low credit scores or limited credit histories. Subprime loans will have higher interest rates than conventional loans. They may also have prepayment penalties if the borrower chooses to pay off the loan early. However, those with low credit or no credit may have no other avenue for purchasing an automobile
How a Subprime Auto Loan Works?
There is no official cutoff score to be considered subprime, but generally, the borrower’s credit score is between 580 and 619. (FICO credit scores range between 300 and 850.)
There is no official cutoff score to be considered subprime, but generally, the borrower’s credit score is between 580 and 619. (FICO credit scores range between 300 and 850.)In evaluating a borrower, a lender will likely ask to see pay stubs or W-2 or 1099 forms to prove income. If a borrower is in a line of work in which it’s hard to prove income—a restaurant server who has a lot of income in cash tips, or a day laborer, for example—they may need to bring in bank statements that indicate a history of consistent cash deposits to their account. Some lenders will accept bank statements in place of, or in addition to, standard pay stubs.
Can you get a car loan with a subprime credit score?
Yes, you can get a car loan with a subprime credit score; however, the interest rate on the auto loan will be higher than that of non-subprime loans.
What is considered a subprime auto loan?
A subprime auto loan is an auto loan made to borrowers whose credit scores are considered
to be subprime, which is typically a range
between 580 and 619, though this can vary
depending on the institution or lender.
The Bottom Line
A subprime credit score is one that is considered to be poor and of high risk to a lender. Subprime loans, including auto loans, come with higher interest rates due to the risky credit profile of the borrower. Regardless of the high interest rates, subprime loans are sometimes the only option for a borrower.
At Del Villar Auto Sales, we know that having reliable transportation is important to a good life. We are here for the community of East Los Angeles to make it a better place and help as many people improve their lives by having quality transportation to make sure they can have an independent life.