When you need a $30000 auto loan to buy a new car, it is highly recommended to understand how banks and lenders evaluate your credit risk and whether to approve your loans or not. This is especially true for first time car buyers or those with no or bad credit. Once you know what is important for the banks, you will be able to take advantage and get cheaper car loan rates or higher chances of getting financed.
Firstly, banks lend money to car buyers in order to make money through interest fees. To consistently make a profit, banks will try to lend money at interest rates that is sufficiently high without losing business to other lenders and at the same time, minimize the risk of borrower loan default which is where the borrowers cannot pay back the money.
This is in fact a balancing act between charging higher interest versus lowering default risk – you can only charge very high interest rates on high risk borrowers. This main system used today by the lending industry is the FICO credit scoring system. A consumer with good credit score presents minimal borrowing risk and thus the banks will offer low APR car loans to such people. On the other hand, if you want to buy a car with bad credit, prepare to pay more interest or even get denied by banks.
Yes, if your credit score is very bad or under 500, you may not even get banks to give you a $15,000 auto loan. Thats all right, since there are always lenders that will give bad credit auto loans no matter how low your FICO score is. We consider how to find such loan companies and and how to increase your chances of getting a car loan approved fast with no credit. They are usually the same money lenders willing to help people with bad credit.
Even though nearly 90% of banks and auto loan lenders use the borrower’s credit score to review the application, some lenders specialize in making car loans to people with poor credit. They understand many car buyers have bad credit and for first time car buyers, they may not have established credit for more than 12 months. These lenders do so because of the more lucrative deals available in offering bad credit car loans. Due to less banks willing to do so, they have lesser competition and can corner the market. And many car buyers are disappointed since they cannot get a cheap car loan from banks, so it is easier to convince them to take up bad credit car financing offers. Very few choose to fix their credit report in order to get cheap car financing.
Most online auto finance lenders use a very simple and streamlined application process for borrowers. Your financial credit worthiness is based on a single industry-wide number – credit score. However, for car loan companies that work with car buyers with bad credit, they will go through the borrower’s credit history and analyze in detail the true cause of the credit problems. If the car loan officer feel that the risk is acceptable, you will be able to get a car loan despite failing a credit check at banks.
Why do such lenders spend more time trying to find out what happened to your credit history in the past? This allows them to help people who need to buy a $30,000 car with bad credit but actually have a low risk of defaulting in future. For example, if you have a stable job with high income, your low FICO score becomes less of a problem especially if you are able to put more money down to pay for the car purchase at these lenders that give bad credit car loans up to $30,000.