Simply put, subprime often refers to a loan which has a higher rate of interest (than that of a prime loan). Most often provided to borrowers with a poor credit rating, subprime loans are typically designed to provide financial assistance to one party and a suitable compensation to the lender for taking on the risk involved.
As you might expect, subprime loans are usually accompanied by an adjustable rate of interest which reflect the extent of which a borrower may be deemed unsuitable for a prime loan. In other words, if an individual has a less than favourable credit rating, the lender will typically offer a rate which considers the applicant’s potential risk to their business.
However, before we discuss a subprime loan any further, let us understand the breakdown of a bad credit score and who might consider a subprime loan:
Why may a lender provide a subprime loan to a borrower?
Although every circumstance is different, there are often very specific reasons as to why a lender might offer terms related to a subprime loan. Here are just a few examples to why the lender may consider an individual a risk to the terms of any loan agreement:
- Borrower has had one or more delinquencies in the past one or two years
- Customer was declared bankrupt at any point during the previous five years
- Individual has been subjected to foreclosure in the past two years
- Applicant has a record for struggling with payments in general
- Poor ratio regarding debt-to-income
What is a bad credit score?
The rate of interest applied to a subprime loan is different in almost every circumstance. For example, borrowers with a credit score below 500 can usually expect to pay a higher rate of interest than those below a credit score of 700. In some cases, with the latter, the terms are often slightly more lenient – though subjected to a slightly higher rate for such convenience.
How to apply for a Subprime loan
Applying for a subprime vehicle loan is much the same as a standard vehicle loan. In this sense, our customers are required to provide relevant documentation such as government issued identification (drivers license and social insurance information) employment details, banking records, and the actual finance application. At this point, our trained credit specialists work alongside several financial institutions to provide a quick and easy application submission. Having had time to fully check every aspect of the application, the lender will decide on the eligibility of an applicant for the vehicle loan.
Our Financial Partners
Are you New to Canada? Perhaps a new job or recent divorce? Have you established good credit, bad credit or even no credit history? No Problem! Our trained specialists will help tailor a car loan and payment plan that works for you.
At the Carter Auto Family we work alongside a variety of leading financial and vehicle loan lending institutions to help deliver the best rates and terms for all our customers, each time …everytime!
- Toronto Dominion Bank – www.td.com
- Royal Bank of Canada – www.rbcroyalbank.com
- Bank of Monetreal – www.bmo.com
- Scotiabank Bank of Canada – www.scotiabank.com
- Canadian Imperial Bank of Commerce (CIBC) – www.cibc.com
- Auto Capital Canada (ACC) – www.autocapitalcanada.ca
- First Access Funding Corp – www.afcorp.ca
- Eden Park Vehicle Financing – www.edenparkcanada.com
- Carfinco – www.carfinco.com …and more!
It’s worth noting that not every lender has the same requirements or process. If you receive an application refusal, we will always provide further options to lenders to which you may readily apply. Additionally, when it comes to subprime car loans, the most critical aspect to remember is that you are not entitled to borrow more than you can afford regarding repayments. Furthermore, the lender is not trying to refuse you for any reasons which may appear unfair, but rather for possible scenarios that are likely or realistic.
We’re committed to help you drive the vehicle you want, the vehicle you deserve!
Our trained credit specialists work alongside numerous financial institutions to provide you with the most favourable terms and re-payment options – best suited to your circumstances! Learn more about our Fast Approvals and 99% Acceptance Rates (no matter your current credit status!) or complete our quick and easy credit application today!
Questions? Great! We’ve got answers! To learn more about our ‘easy car loan application process’ and ‘tailored credit services’ (including our credit re-building program), please call us directly to speak with one of our friendly, credit specialists (no obligation) at: (604) 265-8081