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Are you one of the millions of people that have been affected by the worldwide financial crisis, but in need of a car? Then it might be a great idea to consider subprime lending opportunities before purchasing your car! Most people think regular loans that require

First of all, what does subprime lending really mean?

The clearest way to understand this is to think about it as a financing option for people that have had some unstable income in the past and have not always been able to pay their debts on time. A subprime loan is a loan for people with not so good credit (usually under 600) that carries some differences than a regular loan, such as:

* Higher Interest rates - Remember, because of your low credit score some financial institutions might consider your loan “riskier” than others which might cause you interest to be higher.

* Shorter or longer payment plans - Some subprime lenders offer shorter or longer payment options than the usual 36 or 60-month plans.

Is subprime lending a good idea?

Just like everything in life, there are cons and pros to every side of a story. The short answer is that it depends on your plans and if you can handle a higher interest rate for your car purchase. For example, if your car will be used as an asset to you and your family, then yes. What could be considered an asset varies by personalities, but the bottom line is that even at a higher rate these loans can help you:

* Get a job that was previously out of reach due to distance. This is a great way to take advantage of subprime loans because with a gameplan and steady income you can improve your lifestyle substantially.

* Get an education that was unattainable because of distance. Many of us would like to attend college, but due to transportation issues, we simply can not afford that luxury. This is one of the highest returns on investments that you can get out of any loan - your education!

* An opportunity to improve credit score. Right here is the key to significantly improving your quality of life. The door that better credits open are many, and the best part is that you will be saving a lot of money in the future in interest alone.

An important side note is to check your credit score before going into the dealership. There are both free and paid options to do this, but even the paid options include a one time free credit score report.

Proof of income. What does this mean? This means that you can provide the lender with actual proof of your income and that you are currently employed. You can present the lender with your most recent pay stubs and bank statements, which takes us to an important point. Also, if you intend to purchase a vehicle, start organizing your paperwork months ahead. Remember that lenders want to see that you are earning income. If you have any other asset, then take the paperwork as well because it might help.

Proof of insurance. What does this mean? This step is straightforward. It just means to purchase insurance before you leave the dealership, as it is required by the law. You have two options in this case: purchase insurance ahead of time before heading to the dealer, or you can make a call from the dealership. As long as you leave the dealership insured, you are set!

Proof of identity. What does this mean? To fulfill this requirement you will need a government-issued ID with your signature on it. For example, your driver’s license containing your signature. Also, you will need bank statements or utility bills that have matching addresses with these documents. This is why it is very important to keep your documents up to date so that your address and information matches.

Proof of residence. What does this mean? Very easy to provide this, you can fulfill this requirement by providing two utility bills with your name and current address.

Because you now have an idea of what subprime loans are, so let’s go over the pros and cons:


* Easy to qualify

* Chance to improve credit

* Fast and streamlined process


* High-interest rates

* Irregular payment options (longer or shorter)

* Must be alert and get a loan you can repay

Now, the types of subprime loans may vary by lender, so please research before committing to a loan.

Some of the most common types of subprime loans:

* Subprime loans sometimes require collateral assets such as a car or property

* Lease buyouts

* Car refinancing loans

As you can see, there are options to purchase a car even if you don’t have the best credit in town. Just keep in mind to do the research beforehand and get the best deal possible!


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