Subprime borrowers are those who have earned a low credit score by demonstrating a history of bad credit. Borrowers earn a bad score primarily due to non-payment of borrowed money or loans, defaulting on mortgage payments or credit card bills, or declaring bankruptcy. Most of these borrowers find it difficult to get money from anywhere but the subprime market, including the Vehicle equity loan market. |
Pink slip loans, as they are also known, are short-term loans that cater primarily to the subprime market and bad credit borrowers. Because they are given to subprime borrowers, these loans carry high interest rates and fees to offset the high risk of lending money to high-risk borrowers.
Can Vehicle Equity Loans Help Borrowers with Bad Credit?
It all depends on how you use them. If you use them responsibly, you can actually boost your FICO score. Here's how it works. When you take a pink slip loan, make sure you have a plan in place to start paying back your debt immediately. Before signing the loan agreement, you and your lender should figure out your monthly payments into your monthly budget.
There are online budget worksheets to help families keep up to date on expenses. All bills secured with assets such, as mortgages should be paid first. This also applies to payments towards vehicle equity loans. Otherwise you could end up losing both your home and car.
If you, miss payments for credit cards and other unsecured expenses, it can make a low score worse, but it will not cause you to lose or give up an asset. By paying back your vehicle equity loan regularly, you can actually boost a low rating, since the credit bureaus consider recent activity more important than past activity.
If you are not used to making regular payments on loans or have defaulted on your payments in the past, using an auto title as collateral is a risky proposition for you. If you become unable to make payments and lose your car, things could get even worse for you financially and your credit score could plummet even further.
How to Avoid a Debt Trap
Another thing you should watch out for are the deceptive practices used by some lenders in the subprime market. Because borrowers are often desperate to get cash, they sign on the dotted line without realizing that they are being trapped in a cycle of debt with exorbitant interest rates, rigid terms, and balloon or rollover payments.
Making an informed choice in this case means researching different lenders to find one that offers you a flexible repayment schedule. Read the fine print and ask about the interest rates you will be paying and what happens at the end of term. Find a reputable company that requires you to pay a percentage of the loan principal with every installment so you don't end up paying balloon payments or having to rollover vehicle equity loan.
Most of us use our cars to commute to and from work. Losing your car by repossession to a lender will make it harder for you to get to work and back and worsen your already bad financial situation. It would be wise to weigh the pros and cons before taking out vehicle equity loans.
For subprime borrowers who need vehicle equity loans in South Carolina. Reputable lenders will work with the loan agreement terms to create a flexible repayment schedule that fits your needs. Get quick approval and cash delivery when you apply at www.123fundme.com.
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