FAQs on Subprime Auto Loans, Explained


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Buying a car isn’t always as easy as it seems. For some people, past actions in their credit history can greatly influence their chances of generating auto sales leads for dealers. In some cases, subprime auto leads are used to help get people into the cars they need and want. For the 43% of people who finance their cars, here is some information on subprime loans you should know.

What is a subprime auto loan?

Subprime auto loans are loans for people who have difficulty maintaining the repayment schedule. This can be due to many things, including unemployment, divorce, medical emergencies, and more. Since these loans come at a greater risk to the lender, they often have higher interest rates. On the contrary, this loan option offers loans to those who may not qualify elsewhere.

What classifies a borrower as subprime?

When a lender reviews subprime auto leads, the most important thing they consider is the likelihood that the loan will be paid off. Consequently, the loan may have a higher interest rate than most or may not be approved at all.

Here are a few common reasons a borrower may be classified as subprime:

    • History of late or outstanding payments on other debt
      Late payments on credit cards and other loans may have a negative effect on your credit score. These things are reported to the credit bureaus and can drop your credit score significantly. Furthermore, late payments on your most recent credit history could have a greater impact than previous charges.
    • Bankruptcy
      Borrowers who have filed for bankruptcy may still have a chance to be approved for a subprime auto loan, but at higher interest rates. One crucial factor lenders consider is whether failure to repay an auto loan was part of the bankruptcy. They also check for any vehicle repossessions as well.
    • Unemployment or inconsistent work history
      While not all borrowers have outstanding debt or a history of late payments, some have trouble keeping a job. This is an important factor when applying for an auto loan. Lenders need to know that you have steady income to ensure payments are made. On average, two years of work history is what lenders look for when determining the stability of employment.

Keep in mind that the interest from subprime auto leads generates $10 billion in annual revenue, and these special finance auto leads can sometimes help people who couldn’t otherwise afford a car. While the average interest for auto loans is 4.16%, some auto finance leads, like subprime leads, have interest rates that could be more than double.

Before you go shopping for your next vehicle, understand the auto finance lead process and where you stand. A subprime loan may be best for you. If you are unsure, contact us at CyberLead to know what kind of auto finance lead you fall under.

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