Borrowers with bad credit are seeing a slow but certain expansion of opportunities for buying cars. At each tier of credit rating, it is becoming easier to get car loans. Lenders are also exploring alternative lending options that are helping expand accessible credit.
Installment loans dropped
There was a huge drop in the number of installment loans for bad credit offered for auto purchases in late 2008. Usually, the approval rate for quick cash loans for autos hovered between 60 and 90 percent, depending on the credit rating. In 2009, only about 5 percent of applications for car loans from bad-credit borrowers were approved. Borrowers with very good credit ratings had about a 70 percent chance of being approved for an auto loan.
Auto lending’s effect on the economy
There is a good reason financial industry watchers are keeping a close eye on auto lending. The auto industry makes up about 4 percent of the income in the United States. About 250,000 auto-industry jobs were lost in just the past few years. The simple explanation is that more auto jobs are lost when fewer cars are sold.
Improving lending options
There are a few more options for borrowers who want to buy a car with instant cash loans. To help control risk, numerous lenders are requiring bigger down payments or more valuable trade-ins for bad-credit borrowers. Certain incentives, like the zero percent interest rate, are helping lure customers back to car lots, too. Instead of big banks, credit unions, local banks and specialty financiers have all been supporting the rise in auto loans. Besides all these good signs, it is a very tough lending market if your credit is less than perfect. Three years ago, a borrower with a bad credit score had about a 60 percent chance of getting approved for an auto loan. Today, the rates are sitting around 9 percent and very slowly increasing.
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