Car lending statistics are showing that car loans are opening up for bad credit borrowers. While lending is nevertheless slow for borrowers at each and every credit tier, it is improving. Additional possibilities for bad-credit borrowers are also expanding.
Installment loans for bad credit offered less often
There was a huge drop within the number of installment loan offered for auto purchases in late 2008. Auto loan financing, depending on the credit rating of the borrower, were approved about 60 to 90 percent of the time before 2008. Approval rates for bad-credit borrowers in 2009 were at about 5 percent. Even borrowers with good credit only had a 70 percent chance of getting an auto loans for people with bad credit.
Effect of auto lending
Auto lending has a definite effect on the financial industry. The auto industry creates about 4 percent of the income in the United States. More than a quarter-million auto industry jobs have been lost in just the last three years. In short, with fewer cars sold, more jobs are lost.
Choices for bad-credit car buyers
For borrowers who are planning to purchase a new vehicle, you will find growing possibilities for extra cash. To help control risk, numerous lenders are requiring bigger down payments or more valuable trade-ins for bad-credit borrowers.Certain incentives, like zero percent interest, are helping lure customers back to car lots too. The majority of the new auto loans are coming from financiers and banks that specialize in smaller loans, rather than big banks. Subprime borrowers, though, are nevertheless facing a tough lending market. 3 years ago, borrowers with a bad credit score, known as “subprime” borrowers, had a 60 percent chance of getting approved when they applied for an auto loan with most lenders. Approval rates for most subprime borrowers, though, are at only about nine percent – which means that there is less than a one-in-ten chance that those with bad credit will actually be approved for an auto loan.
