As a result of the Great Recession in December, 2007, many people lost their jobs, fell behind on loan and credit card payments, lost their homes or filed for bankruptcy. This financial turmoil negatively affected the credit of thousands of people throughout the country. Things started to turn around in 2009, and the job market began to grow again, however, many consumers are still trying to clear those nasty scars from their credit reports. So when a consumer in this predicament applies for a loan or any type of financing, because of less than perfect credit, they fall into the subprime lending category.
Investopedia.com defines a subprime customer or borrower as, “A person who is considered a higher-than-normal credit risk. Subprime borrowers typically have a below-average credit history and are penalized for their poor credit with higher interest rates. Subprime borrowers may have an extensive history of late or missed payments, default debt, excessive debt or no property assets that could be used as security. In the United States, subprime borrowers are often identified by having a FICO credit score below 640.”
The truth is that a subprime customer could be anyone. Anyone can fall on hard times and struggle with making payments on a loan. Sickness, medical bills or a job loss can severely and financially impact any family or individual. It could be your neighbor, a friend or a teacher at your child’s school. It could be you! Often, when they are trying to get back on their feet again, these people may find themselves in need for another loan – perhaps a car loan this time. Subprime lending can actually help a consumer in this situation. According to an article on The Washington Post.com, “The majority, or 56 percent, of consumers have subprime credit scores … As a result, these consumers are often locked out of the lending markets.” So before you begin to judge a subprime customer, let’s review some of the myths about this large percentage of the population.
Subprime Customer Myths:
They don’t have a job
Just because a customer has bad credit does not mean that they do not have a job. In fact, many consumers with a history of bad credit may work two to three jobs to make additional money to pay off their debt.
They are in bankruptcy
While some subprime customers may have a past bankruptcy on their credit report, many are just struggling to pay back debt that overwhelmed them. Subprime lending can help customers with all types of credit problems.
They will never pay back the loan
While you can never predict the future, statistics indicate that subprime borrowers will diligently repay their loans, especially to reestablish credit and/or improve their credit score.
No financial institutions will give them a loan
There are many lenders who specifically cater to people with credit challenges. Whether you have bad credit or no credit at all, credit score alone does not determine if you get a loan. Other factors in qualifying for a loan will include your income amount, employment history and stability and debt to income ratio.
SubrimeAutoLeads.com provides credible subprime auto leads to automobile dealerships throughout the country. In partnership with credible websites like CarCredit.com they offer customers a financing opportunity that may have been denied to them many times before. Visit their websites or call 1-866-311-LEAD today.