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HIGH RISK LOANS: WHAT TO EXPECT

A high-risk car loan may not be the best way to finance a car, but it might be the only solution available for people with poor credit and great need for personal transportation.

If you have a lower credit score or lower income than before, you may have no other choice but to accept the difficult terms that go with high-risk car loans.

In that case, here’s what to expect:

Soaring Interest Rates

Interest rates on high-risk loans for cars can be as high as twice the interest rates offered to borrowers with good credit. Lenders feel justified in charging high rates because of the perceived risk in taking in bad-credit loan accounts. Even though lenders have made high-risk loans more available than before, they are still more than cautious when granting approval. They view a consumer with low credit rating as someone who is very likely to default on the loan no matter the circumstances.

Many consumers also believe they have no other choice than to accept these terms.

There are several ways to lower the interest rate you are likely to be given.

Sizable Monthly Payments

Since high-risk loans carry high interest rates, expect to pay bigger monthly payments.

But what others do to reduce the amount they ought to pay every month is extend the loan term. Choosing a longer loan term does cut the monthly payment. But that’s only superficial.

You can do the math now to realize that you’ll be paying more over time. You don’t have to wait for the term-end to see that.

If you really need a car right now and can’t afford to spend some time improving your credit, make sure you are earning enough to make the payments on time. (And yes, you’re reading it again.) Missing a payment only worsens your credit standing.

Little to No Flexibility

High-risk auto loans have very little flexibility in payback terms. They usually require prompt payments while regular car loans allow a grace period. Moreover, most high-risk lenders charge crippling late fees even if the payment is just a day late.

Prescott Financial is also accepting auto loan applications from people with less-than-perfect credit. But we want you to improve your credit through our financing programs. This is why it is our pleasure to create a flexible payment plan that suits your financial situation.

How to Improve Your Credit with a High-Risk Loan

Even though high-risk loans come with high interest rates and strict terms, a lot of borrowers are able to use these to rebuild their credit. Let us give you a couple of ideas on how to improve your financial portfolio.

1) Find a lender that offers agreeable terms and conditions then comply with them 100% throughout the loan. Make your payments on or before the due date to make sure your payments are always on time.

2) Add extra money to your payments in order to pay the loan off early. But before you actually do that, ask your lender if you can pay the loan off early. Some lenders penalize borrowers who complete their payments ahead of schedule. The penalty is called Prepayment Penalty which usually translates in a hefty amount.

With all that said, realize that you can begin with high-risk auto loans to restore your credit and have a personal means of transportation at the same time.


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Prescott Financial
1614 Tower Way Superior, WI 54880