Car lending statistics are showing that car loans are opening up for poor credit borrowers. While lending is nevertheless slow for borrowers at every credit tier, it is improving. Expanded possibilities for alternative lending are helping to create additional credit.
Drop in lending installment loan
There was a huge drop within the number of installment loans offered for auto purchases in late 2008. Auto loans for bad credit, depending on the credit rating of the borrower, were approved about 60 to 90 percent of the time before 2008. In 2009, only about 5 percent of applications for auto loan finance from bad-credit borrowers were approved. Even borrowers with good credit only had a 70 percent chance of getting an auto loan.
The economy effect of auto lending
There is a good reason the financial industry watches auto lending. The auto industry creates about 4 percent of the income within the United States. More than a quarter-million auto industry jobs have been lost in just the last three years. In short, with fewer cars sold, more jobs are lost.
Getting better lending options
Using quick cash to buy cars is getting easier for some borrowers with bad credit. To help control risk, numerous lenders are requiring bigger down payments or more valuable trade-ins for bad-credit borrowers.Incentives such as zero interest are also propping up auto sales. Regional and local banks, as well as specialty financiers are all increasing the number of loans offered to all levels of borrowers. Subprime borrowers, though, are nevertheless facing a tough lending market. 3 years ago, a borrower with a bad credit score had about a 60 percent chance of getting approved for an auto loan. Today, the rates are sitting around 9 percent — and very slowly increasing.
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