There are many subpreme borrowers out there that have managed a low credit score due to a history of defaults and bad credits. The borrowers get bad score mainly because they fail to pay back the loan or borrowed amount, or they default on bills of credit cards or mortgage payment or they declare bankruptcy. Most of such borrowers find it extremely difficult to get any more money from any financial body apart from subprime market, which also include auto equity loans market.
There are something called as pink slip loans that are given for a short period and they cater mainly to the borrowers with bad credit and subprime market. As they are mainly intended for the subprime borrowers, they are often offered with very high rates of interests and processing fees. This is done mainly to offset the very high risk that comes with lending money to people with bad credit scores.
Let us now see how vehicle equity loans help the people who have bad credits. The thing is these types of loans can help someone only of they know how to use them in a responsible way. If the loan is used in the right manner, it would actually help in boosting the borrower’s FICO score. Let us see how this works. Right before going for one of these pink slip loans make sure you have already planned about how to pay back the debt.
Before you sign the dotted lines of your loan agreement, explain to the lender how you plan to pay back the loan and still save enough money for your monthly expenses. There are many budget worksheets available online that help borrowers be up to date when it comes to their expenses. Your first aim should be to clear off all your bills that are secured with different assets like mortgages. One of these is also your auto equity loan. If this doesn’t happen in a planned and organized way there are good chances that you would lose both your car and home.
If for any reason you are not able to pay for your credit card bills or any other kind of unsecured expenses, it would obviously hit your credit score and make it worse, but at least there are no risks of losing an asset. By paying the installment of the auto equity loan on a regular basis you can actually help in boosting your low credit score. This is so because the officials at credit bureaus pay more attention to your recent financial activities than your past financial activities. If paying back loan on a regular basis is something that you have not practiced in the past or you have been part of many payment defaults, then leveraging auto title as one of the collateral is certainly a one of the risky propositions. If you fail to make payments even here and end up losing your vehicle, things will only deteriorate and your credit score will obviously plummet much more.
As a borrower it is also important that you don’t fall for any trap and avoid any kinds of deceptive activities on part of the lender you are borrowing money from. Borrowers are often in a hurry to get cash and they don’t think too much on the high interest rate, strict terms and conditions and a series of rollover payments that they are going to get trapped in. So, be smart and thoughtful before you go for a pink slip loan.