Negotiating High Risk Auto Loans for Better Terms

High risk auto loans are available to individuals with poor credit at a higher interest rate than industry standard. If you require a high risk loan due to your credit history, you must be aggressive in negotiating terms to get the lowest possible rate. The most important thing to remember is you have the ability to actively change the amount you will pay in interest rates through electing the best possible options for yourself.

Prepare Your Credit

Being high risk typically means you have poor credit, but just how poor that credit is heading into your loan application process is up to you. Be prepared by paying down a significant portion of your revolving credit lines before applying. This means you should be carrying less than a 10% balance. Payments for at least two years prior to applying for a loan, should be current so do your best at keeping up with your payments. If this is your first auto loan, prepare your credit by opening a few credit cards at least a year prior to your appolication. Making regular payments will build a small degree of credit on your behalf.

Prepare a Diligent Application

Your application as a high risk borrower should reflect an overall appearance of stability and responsibility. This means everything from providing multiple sources to verify any statements you make on the application. References from employers or other lenders, such as a landlord, can attest to your financial stability. Ensure all information on your application is accurate, especially if you are providing car insurance information. Having consistent car insurance prior to a loan application is an indication of a responsible motorist.

Opt for a Secured Loan

Secured loan is a term used when you put down some form of collateral. The collateral may be seized in case of default, giving the lender a guarantee they will not have with an unsecured loan. This is a sure way to bring down interest rates on high risk auto loans, but it does carry some risk. If you default, your asset, such as a home or business, may be seized.

Choose Higher Monthly Payments

A short loan with higher monthly payments can reduce your interest rate. It may sound attractive to only pay $150 a month on a $12,000 loan, but the interest assessed overtime makes the loan significantly higher than the amount borrowed. If you can afford higher payments, you stand to save a lot of money. When presented with the options, do the math to see how much each will cost over the life of the loan to truly find the best deal.

Provide a Large Down Payment

The bigger your down payment, they less you will owe on your loan over time. Saving for a down payment offers the lender an incentive to approve your auto loan as well, as they will receive immediate cash on hand. Provide at least 20% down, preferably 50%, to ensure you are getting a lower interest rate and a better deal.


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