Subprime Vs. Prime Car Buyer, Which One Are You?

When you’re in the market for a new vehicle, you might hear the term subprime vs prime car buyer. These two categories are critical to the loan you’ll receive, including the terms and rates on offer. These two types of lending reflect your financial situation and determine the arrangement you’ll have with a lender if you’re accepted for a loan. With that in mind, it’s essential to understand each category, know where you fit in, and what you can do to change that, if necessary. 

What Is A Subprime Car Buyer?

A subprime car buyer is someone being offered a subprime or bad credit loan. It means the individual has a bad credit history. While that sounds negative, this category makes auto loan financing possible, even if your credit score isn’t good.

A subprime car buyer is considered a higher risk by lenders. Consequently, anyone in this category will face higher interest rates and less flexible loan terms. While your credit score might be low, buyers in this category can use their financial stability, a bigger down payment or a cosigner to improve their options. As a result, the whole process might take longer to agree.

What Is A Prime Car Buyer?

You can tell if you’re a prime car buyer if you’re being offered a prime loan. The criteria include having a high credit score, a lengthy and solid credit history, and a track record which shows that you can manage debt well. Other factors include a steady job and minimal outstanding debts. As a result, you’re categorized as a low-risk buyer. 

Since there is a lower risk, interest rates tend to be lower, and terms are more flexible, including longer terms and payment grace periods. Prime buyers might not have to make a down payment or just a low one. These loans are straightforward and quick to process.

How Can You Move from Subprime to Prime?

When looking at subprime vs prime, there are some similarities. Both types of loans can improve your credit score, although subprime car buyers have the most to gain from that. In fact, that’s one of the ways you can move from one category to the other, as paying off loans improves your credit score.

Overall, the goal is to get prime loans over subprime ones. You’ll have more options when it comes to refinancing, terms and interest rates. Subprime buyers can improve their situations by paying off existing debt, showing a steady income and getting a stable job.

Where Do You Fit In?

Now you know whether you’ll get a subprime or prime loan, you can consider your financing options and undertake any work necessary to improve your situation. Talk to the team at Progressive Auto Sales in Sarnia, Ontario, to discuss your finance options and how you can get approved.