What You Should Know About Subprime Loan Rates

Subprime loan rates can greatly vary from regular loan rates, so becoming familiar with how the rates work and what is involved in essential. If you are seeking a subprime loan and would like to better educate yourself about the rates, please read the information below which highlights how rates are determined and what you should do to get the best one from a company.

What You Should Know About the Loan Rates

The rate for a subprime loan depends on a number of factors and will be determined by the lender. However, there are others fees and information that you should know about regarding the rates for the loans, which is highlighted below. 

The Lender Decides the Interest Rate- Subprime loan rates are determined by how big of a risk the potential borrower is deemed to be; the higher the risk, the higher the subprime loan rates will be. Factors that affect subprime loan rates include the potential borrower's credit score, the size of the down payment, how much he/she earns, and how long the borrower has been working for their employer. This process will vary from lender to lender, which is one of the reasons that the interest rate can fluctuate significantly from one subprime lender to the next.

Subprime Loan Rates are Higher than Prime Rates- Subprime loan rates are generally 2 percent to 6 percent higher than the average prime rate. By knowing the current prime and subprime rates, the consumer is able to determine whether the rates of any one lender are too high or are reasonable which is a powerful tool when shopping for a subprime loan. You can check the current rates for both kinds of loans with a simple internet search.

Additional Subprime Loan Fees- There are additional fees that come along with a subprime loan. In order to make a sound judgment about which subprime lender offers the best overall costs, the borrower will want to know what fees the subprime lender charges in addition to the interest rate. For example, a subprime lender could charge for the consultation, the credit check, and even the for an application. While it may not seem like much, these amounts add up and are likely unnecessary fees.

What You Should Do to Get a Great Rate

Find Out the Lenders Subprime Loan Rate- Since subprime loan rates vary from one lender to the next, the consumer should know what a lender charges before signing any contracts. Some lenders will give a potential borrower an estimated rate if the individual knows their credit score, while other lenders will make the consumer go through the application process in order to give the individual an estimate. Overall, you should know ahead of time how the much the rate could potentially be through an internet search or by contacting lenders and asking them as to their procedure in giving rate quotes.

Off Season Subprime Loan Rates- A consumer can save money and attain a lower rate by purchasing in the "off season" for subprime loans. During the fall and winter, subprime lenders are much more competitive because of the lower number of borrowers on the market. This is a good time for a consumer to seek out multiple quotes from lenders as you will likely receive more competitive, as well as generally lower, loan rates.