Sub-prime borrowers are the first to suffer during a credit crunch. It can be difficult to obtain a loan in the best of climates with a FICO under 600, but those under 700 can face restricted lending from time to time. Fortunately, lenders are starting to loosen their death grip on second chance auto loans.
Despite the loosening of the credit purse strings, there are still four tips that you should heed before trying to obtain second chance credit:
- Know your credit score before shopping for a car and double check your credit report for inaccuracies.
- Plan on a minimum of a 10 percent down. This can either be in cash or trade equity.
- Start with a short term loan as a way to rebuild your credit.
- Look at compact or midsize cars. The smaller the loan amount, the better your chances of obtaining a sub-prime car loan.
The purse strings may be loosening, but you still have to be careful not to borrow too much or miss payments. If you are already using second chance financing, you may not get a third chance.