Borrowers with bad credit are seeing a slow if certain expansion of options for purchasing cars. While lending is nevertheless slow for borrowers at each credit tier, it is improving. Expanded opportunities for alternative lending are helping to create additional credit.
Installment loans dropped
There was a huge drop within the number of installment loans for bad credit offered for auto purchases in late 2008. Auto loans before 2008 were typically approved between 60 and 90 percent of the time. In 2009, personnel loans given to borrowers with poor credit for auto purchases dropped to 5 percent. Even applicants with good credit only had a 70 percent chance of getting an auto loan.
How auto lending changes the economy
Many financial industry watchers are keeping a very close eye on auto lending — and for good reason. The auto industry creates about 4 percent of the income within the United States. More than a quarter-million auto industry jobs are lost in just the last three years. When automobiles aren’t sold, jobs are cut.
Improving lending options
For borrowers who are seeking to purchase a new car, you will find growing possibilities for fast cash. To help control risk, many lenders are requiring bigger down payments or more valuable trade-ins for bad-credit borrowers.There are some incentives, like low payments and zero interest, that are helping auto sales improve. Most of the new automobile financing are coming from financiers and banks that specialize in smaller loans, rather than big banks. Even with all these good signs, it is a very tough lending market if your credit is less than perfect. Just two to 3 years ago, there was a 60 percent chance of a “subprime” borrower getting an automobile loans. Though the rates are now improving, approval rates at the moment stand at about 9 percent.
