If you have a good credit score, you can go for prime loans. Prime loans offer you the incentive of lower interest rates. Following the finance boom during 80s, lending companies started offering subprime auto loans. These loans are specially meant for people with not so good credit score.
Unlike the prime loans, subprime loans carry much higher rate of interest. Lenders generally use a method of rating the applicants. Applicants here mean the people who apply for the loan. The method is based on the FICO ratings. A person having a credit score above 650 can go for prime loans.
But the fact that many people have credit score less than 650 does not stop money lenders from offering finance for automobiles. You can apply for the loan provided you have a steady income and if you are above 18 years of age. However the process is a bit lengthy.
In contrast, subprime auto loans are much faster and easy. They have minimal paperwork. All you have to submit is a proof of income and a proof of age. Some companies also require a quotation from the automobile dealer. In any case, once your loan is sanctioned, you have to submit the installments by way of post dated checks.
Most lending companies employ flat interest rate. This means you give them post dated checks of equal amount from your active checking account. The amount on the check will vary per scheme. If you go for a longer period loan, you pay smaller installment. But the overall amount you pay will be much higher than you borrow, as the interest is flatly applied over the time period.
Another disadvantage of going for a subprime auto loan is that they apply a prepayment charge. In case you want to pay off the loan before the tenure ends, they charge some per cent of the balance loan amount. This ensures that the lenders do not lose out much on the interest they would have otherwise earned. You have to check the prepayment charges too while selecting a lender.
Carney Alden is a Masters in Accounting and Financial Management from Lancaster University Management School. Having completed his Masters in Finance from Derby University. He provide useful advice through his articles that have been found very useful. To find Instant Auto Loans , New Auto Loans, Auto Financing visit http://www.consumerautolending.com