Automakers were able to sell16.5 million automobiles in July 2014 because of auto loans, particularly bad credit auto loans. But, there is a negative side to this phenomenon. The auto loan delinquency rate is also rising with the increase in bad credit car loan approvals.
According to Experian Automotive, the 60-day loan delinquency rate has increased to 0.62% of borrowers from last yearís rate of 0.58%. It means there is an increase of $859 million in the balance of delinquent loans since Q2 of 2013.Also, there is a minor increase in 30-day delinquency rate. It grew to 2.39% from 2.38% meaning $2.8 billion increase from the previous year.
One thing is clear from this data that even though lenders are offering easy approval on bad credit auto loans, it is becoming a bit difficult for sub-prime borrowers in handling the loan. It is because people are taking advantage of the relaxed lending norms without considering their financial situation. If you are thinking of obtaining a bad credit auto loan, you must consider these tips:
Your Need or Your Desire
Do you really need a car? Is it something that is necessary to sustain and improve your life or is it just a craving? It is very important to differentiate between your needs and desires. Donít apply for a bad credit auto financing program if you donít need it. There is no need to assume unnecessary financial burden because it can cause harm to your credit score.
Calculate your Savings
Before searching for a car, you must sit down and calculate your savings. If you know about your total savings, you can use it for any unexpected future expenses. This way any unanticipated problem or expense wonít create any trouble in making repayments in the future.
Detoxify your Home
It may seem like a weird advice, but it is very useful. By detoxifying your home, I mean getting rid of unwanted things. Sell them on ebay or any other reputed website. You can even organize a yard sale and raise money for down payment. Trading your old car is also a good way of removing junk and reducing the car loan amount.
Planning your Financials
When you take a bad credit car loan, you accept the responsibility of making regular payments. So, it is important to prepare for payments beforehand. If your loan term is going to be five years, plan for the entire term. Know your expenses and increase your income if you are planning for a wedding or a vacation during the loan term. It will help you in staying on top of your payments.
Many lenders will offer you quick bad credit auto financing, but you have to repay it for getting better rates in the future. You have to make sure that you donít fall behind on payments because it will increase the chances of repossession and pose great risk to your credit score. So, follow these tips before submitting your car loan application.
Remember to look before you leap!
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