Financial Institutions Make A Comeback in Lending Car Loans to Consumers Ailing with Bad Credit

If you are shopping for a new car and you are not in excellent credit rating, you may face a challenge in obtaining a car loan. It is not easy to save for your car considering the increase regular expenses you have to pay in your home expenses like food, electricity, insurance, and telephone bills. During the recession that hit many parts of world from 2007, the granting of loans was affected. Initially before the economic crunch, banks and financial lenders were willing to lend consumers money but when the crisis began, they became reluctant in lending.

Before the crisis, many borrowers had borrowed money and when they were faced with economic challenges many defaulted the payments of the loans. For car buyers who needed funding, they had to get through tough times as the average credit score was skewed to a level high of 776 as in early 2010. This meant that car buyers with credit rating lower than 776 were limited in obtaining car loans.

However in a credit analysis that was released by Experian Automotive in the recent times, it has shown than car buyers are now getting approval for credit facilities even with poor score. According to the analysis, as in the first quarter of 2012, the average score for car buyers to obtain vehicle loans had gone down to about 760. The director of automotive credit at Experian Automotive, Melinda Zabritski noted that a few years ago, it was very difficult for a car buyer to get a loan when in bad credit.

Melinda further said that a lot of lenders who offered subprime financing did not even have the funds to lend. Following the positive economic growths being realized after the deep credit crunch, things are not turning bright for the car buyers. Buyers with lower credit scores are today getting approved for car loans and the rates fell way below 659 points as at 2012.

Moreover, lenders seem to be offering more loans to car buyers with a notable increase of loans for car buyers with non-prime to deep prime scores i.e. 679 to 550 are below. In size, buyers are getting bigger loans for both new cars and old vehicles. The Experian automotive credit analysis also found out that lenders are now offering lower monthly payments than before for used card loans and new vehicle loans.

The low interests for new vehicles and used cars coupled with longer terms of payment make the repayment of car loans affordable. The increasing trend in lending has partly been fuelled by the increased confidence among lenders. Consumers are today paying back their loans as agreed and this has increased the lenders’ confidence.

And because car loan borrowers were paying back their credit as agreed, there was notable reduction in vehicle repossession. Melinda further said that when lenders have low losses, they are able to lend more and even at better rates and all these aspects benefit the consumers. For many years, car buyers have struggled to get vehicle loans but today it seems their cry has been heard by lender owing to the favourable lending conditions.