Finding Competitive Special Finance Auto Loan Rates

Special finance auto loans are extended to those with poor credit typically at more expensive rates than those offered to borrowers with higher credit scores. If you are seeking a special finance auto loan, otherwise known as a high-risk loan, you must be aggressive about negotiating your options to save money over time. Several strategies may be employed to locate the right loan. 

Use Dealer Approved Loans

Dealer approved loans are often easier to secure than bank loans. The manufacturers have an added incentive to finance your purchase because you will be using the funds to purchase one of their vehicles. These loans are not often the best deals; they may have large penalties if you pay them off early. However, for a special finance loan, they are often easier to obtain than loans from credit unions and banks. 

Opt for Secured Loans

Secured loans are a great option for high-risk borrowers because your collateral gives the dealer added security that you will not default on the loan. Collateral options can be another car that your family owns, your home, your business or other assets. The lender will give you better rates on a secured loan because they have a lower incidence of default. However, you must be prepared to cede that asset in case of default. 

Provide a Large Down Payment

Down payments are similar to collateral because they provide the lender some added assurance you are financially stable. If you can provide at least 20% of the total purchase price of the vehicle in a down payment, a lender will be more likely to offer you good finance options. You may want to go as high as 50% for a special finance loan, if you have the funds available. This means you will often have to opt for a less expensive car in order to make a sizable down payment. 

Look for Added Incentives

Dealers offer discounts to certain employers, military personnel, teachers and students. Search for incentives; a dealer will not offer them if you do not ask. Ask your employer if they have a deal with any particular auto company prior to selecting the car you are going to purchase. You may find your employer purchases mainly Ford's for their company cars, and as such they have a special group discount. Utilizing these incentives, even if they only knock a small portion of the price off the car, will make the cost of your loan over time much lower. 

Choose High Monthly Payments and Short Loans

The best way to lower your interest rate, on any type of loan, is to pay more each month over a shorter period of time. The longer you take to pay off a loan, the higher the interest rate will be in most cases. If you can afford a high monthly payment, opt for a three to five year loan. Remember, even a half a percentage point increase adds up to a lot of savings over time.


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