Bad Credit 101Sep 17th, 2020
Bad Credit 101 with Palladino Lending Solutions
Bad, non-prime, and subprime are all words that get thrown around when it comes to having a less than ideal credit score, but they’re by no means a death sentence when you’re looking for your next vehicle. The reality is, the majority of the car buying market is made up of real people just like yourself, and very few people are immune to the kind of financial setbacks that can impact your credit score—something that the recent global pandemic has simply underscored. In fact, a 2017 study showed that around 47% of Canadians were living paycheque to paycheque, which doesn’t allow a lot of wiggle room for having a bad month.
What is bad/subprime credit?
The three main types of credit ratings used by financial or lending institutions are subprime, prime, and super prime credit. While those with prime or super prime credit will generally have no issue getting a vehicle loan (at a lower rate), having subprime credit makes this a bit more difficult. It means that you appear to be a greater risk to lenders, in terms of not paying back your loan. There are a number of factors that impact your credit score that you can find here. The bottom line is, having subprime credit allows lenders to charge higher interest rates to ensure they’re covered.
How does subprime credit impact your ability to buy a car?
Because you’re seen as a greater risk, in terms of paying back the loan, you are likely to only qualify for higher—sometimes prohibitively so—interest rates. In fact, lots of dealerships and companies working in the automotive sector will target those with subprime credit, so that they can make more off of interest payments. How many times have you seen rhetoric along the lines of “We’ll approve anyone, regardless of their credit history”. While this is true, it doesn’t mean they’re providing an objectively good vehicle loan. By taking advantage of those already in a precarious financial situation, and marketing their services to those with poor credit, the end result can actually be quite detrimental to the customer since a higher interest rate will result in a larger payment which is more likely to be missed or not paid in full.
How can Palladino Lending Solutions help?
The reality is, if you have poor credit you will undoubtedly need to pay a higher interest rate. However, many dealerships that target the subprime customer offer fewer vehicle options, so not only do you pay a higher percentage but you’re paying it on a more expensive vehicle. But as a part of the Palladino Auto Group, comprised of 11 dealerships, you’ll have access to a greater number of vehicles in our inventory. This means you can still find a vehicle that suits your needs, without getting stuck with a car payment and interest rate beyond your means.
Another way we help is our Return To Prime program. You can read more here and here, but basically, we’ll reward you for making your payments on time—actually reducing the interest rate on your loan year over year if you make your payments. This way, you can rebuild your credit score for your next vehicle. Our experienced team is also happy to help provide a variety of solutions for you, in terms of other ways you can budget and improve your credit.
So regardless of your current credit situation, let the team at Palladino Lending Solutions help. From lowering your interest rates, to our proprietary iDealer Plus technology, we’re in the business of providing our customers with credit solutions!