Though there’s no legal definition for second chance auto loans, the industry distinguishes them from the basic bad credit auto loan in that the loan is specifically sought after and offered for the specific purpose of rebuilding damaged credit. Some credit agencies market directly to the consumer guaranteeing approval under most bad credit circumstances, while others are offered through car dealerships who act as secondary agents for multiple lending institutions. While it’s possible to get second chance auto loans, they are beginning to get rare in this slowing economy.
Seconds chance auto loans are the main tool for consumer friendly lenders, that is, lenders who make their trade on rebuilding credit for people who are struggling financially in order to get the repeat business. These companies work for profit and are very upfront about who they’ll offer auto loans to, and under what circumstances. They’ll require a credit history, credit scores, proof of income, and in some cases, a co-signer. These auto loans will always come with a higher than normal interest rate, but that’s to be expected since the lender is taking a risk on someone who has already had difficulty meeting the obligations of credit. How high the interest will be is up to the consumer to negotiate, or move on to another lender with more reasonable rates. The lending industry is built on competition and the market for second chance auto loans is still a fierce one – though, it will take time and patience to find a lender with affordable terms and rates.
Not all lenders are created equal. Some lenders will charge an initial fee for their services whether they perform, or not. It is best in these circumstances for the consumer to move on. There’s no reason to pay a fee upfront, nor is there a reason for a legitimate lender to charge one. In fact, for the majority of lending agencies, an initial consultation is offered at no charge. Fees are, however, charged after the auto loan is brokered. Completion of the loan agreement is done upon payment for the lender’s services and these can vary widely from lender to lender. Again, it’s up to the consumer to find a lender he, or she, can afford.
Second chance auto loans are not handed out like candy. But, the industry still recognizes a market opportunity in providing consumers with auto loans that are designed to rebuild damaged credit without putting them on the hook for outrageous fees and interest. Affordability is what consumers with bad credit are looking for and, many lenders are realizing the value the majority of these borrowers bring to the table. With patience and due diligence, anyone can find auto loans that fit within their budgets – anyone can get a second chance.