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Your Interest Rate on a Subprime Auto Loan


Special finance lenders are willing to approve applicants with damaged credit, but they also charge higher than normal interest rates. This is why the majority of credit-challenged applicants want to know what their interest rate will be.

Special Finance Lenders

People with low credit scores or a bruised credit history will be happy to learn that there are lenders out there willing to approve them for auto financing. But special finance lenders, also known as subprime lenders, generally don't deal with direct lending. Instead, they only work with certain dealerships.
Subprime Auto Loan
At Canada Auto Loan, we have made it easy for consumers to find the dealerships that work with these lenders. If you apply with us, we will match you up with the one in your local area that stands to give you your best shot at auto loan approval. Finding the proper financing has never been easier.

But it's natural for applicants and potential applicants to wonder what kind of interest rate they will qualify for.

Your Interest Rate

A lender looks at a lower credit score and sees extra perceived risk. Subprime lenders offset this perceived risk by charging higher interest rates when compared with standard loans. But we will never be able to tell you exactly what your interest rate will be. Here's why:

Interest rates are normally assigned based on your credit score. But with a subprime auto loan, many additional factors are taken into consideration.

These include but are not limited to: Your income, debt-to-income ratio, payment-to-income ratio, loan-to-value ratio, down payment amount, employment and residence stability, auto loan history, credit situation (i.e. is it situational bad credit or habitual bad credit), and more.

Because of all of the factors that are considered, it would be foolish for us to speculate what your interest rate might be. But we can show you how to minimize your exposure to these higher-than-normal interest rates.

How to Reduce Your Exposure to Interest

There may be no way to avoid a higher than normal interest rate, but there are plenty of ways to reduce your exposure to interest charges on your loan.

  • Make your Term as Short as Possible - Simply stated: The shorter your loan term, the less time you are charged interest. If you take out a three or four year loan as opposed to a five or six year term, you can save big money over the life of the loan. While shortening the term of your loan may make your monthly payments slightly higher, it will greatly reduce the total cost of financing.
  • Buy an Affordable Car - If you look to buy only the most affordable vehicles (think small sedans), then you will naturally have to borrow less money. An affordable car will make your monthly payment amount easier to manage, even if you shorten the length of the loan. Plus, if you leave yourself wiggle room in your budget, it may be easier for you to make larger payments, when possible, and pay off your loan faster.
  • Have a Down Payment - Every dollar you have to put down will reduce the amount you need to finance. Reducing the amount you need to finance will not only lower the interest charges, it may also allow you to  shorten the loan term, further reducing the interest charges.

Getting Financed

At Canada Auto Loan, we have the skills and experience to help get you approved for auto financing even during difficult credit circumstances. Get back on the road by filling out our secure and obligation-free online application today.