Shopping for a new car can be extremely stressful when financing and affordability are top concerns. As the majority of consumers need to obtain financing, a limited credit history or poor credit can make the process even more frustrating. Without approval for a loan, the options are to find a co-signer, save up enough cash, find a cheaper vehicle, or continue to rely on friends, family, and public transportation. In some areas, public transportation is limited or even non-existent. Fortunately, there are companies like Consumer Portfolio Services that provide financing to applicants with limited or poor credit histories.

Financing a Vehicle

The traditional process of financing a vehicle typically requires a suitable debt to income ratio, an acceptable credit report, and proof of adequate income. When consumers apply for an auto loan through a dealership, the dealer may offer incentives such as no money down or a low interest rate throughout the life of the loan. Even if these incentives exist, the total purchase price of the vehicle minus any trade-in credits and down payments are weighed against the consumer’s ability to pay off the remaining balance.


Lenders will approve a loan applicant based on his or her credit report, verifiable income, and debt to income ratio. A history of late payments, loan defaults, bankruptcies, liens and judgments will negatively impact one’s ability to obtain a loan. A limited credit history is often viewed as the equivalent of a poor history in the eyes of a lender. Without a credit history, a lender has a difficult time determining if an applicant will make payments on time. When an applicant’s income is too low or the debt to income ratio is too high, this increases the risk that the applicant will not be able to make payments.

Alternative financing companies and lenders take on these risks, while allowing consumers to work on repairing or establishing their credit histories. Usually a higher interest rate is associated with these types of loans. The higher interest rate compensates the lender for the increased risk of non-payment. However, for those that are not able to obtain traditional financing, it can mean the difference between being able to purchase a vehicle and having to go without one of life’s necessities.

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