With the job market gaining strength recently and consumers making major purchases like homes and cars, credit scores are improving for some who can pay off bills and debts owed during the market collapse. But for many others who are still struggling to make ends meet, their credit scores are still suffering due to late payments and slow payments during hard times. Car finance has seen an uptick in subprime car finance/loan – those for consumers who have less than credit but still need a car for work to make a living.

Subprime car finance/loan by definition are a type of loan offered at a rate above average interest to individuals who do not qualify for conventional car finance/loan. For instance, if a car buyer has a great credit score of around 750 – 800, he or she can get financing with an interest rate of around 4% “apr” currently, depending on their bank, whether the car is new or used. However, if their number is below 700, they may qualify for a subprime loan at a higher interest rate. The good side of this car finance option is that the buyer still gets a car and is able to get to work and have a ride they can depend upon daily. The bad side is that this higher rate means they’ll be paying more interest on the money they borrowed but not getting any more value for the money.

Subprime car finance/loan, like conventional ones, are good in that once they are paid off the credit score improves. A loan paid off with payments being made on time and early pay offs, if possible, are always a positive financial situation and will improve one’s credit a score. But the catch 22 in a way is that if a person uses this type of loan, they’re probably already struggling with their financial money situation, so they may likely miss payments, make late ones or go into default. So, with this in mind, subprime lending as a car finance option is like any other- it has to be paid in a timely manner and paid off in order to be a smart money decision.

The idea of having money to make money still rings true as it always has – people have to have money in order to purchase the basic necessities in order to go to work and make money. Cars, homes, clothing, food, daycare etc. all of these things are required for people who work for a living. And they are all growing more and more costly each year. People can rarely afford to pay cash for a house or car- finance becomes inevitable for some, but the money still has to be there to pay off the car finance/loan, one might have borrowed loan. A subprime car finance/loan may not sound ideal to those who are in the know when it comes to economics and budget, but for some it’s the difference between having a dependable way to work to earn a living and support a family in today’s society.

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