by Why Buy Here Pay Here Dealerships Charge Higher Interest Rates than Banks?
The first thing you might notice when you decide to opt for buy here pay here in Greenville is the comparatively higher interest rates than banks. While auto loans from banks come at the rate of 5-6%, buy here pay here interest rates hover in the 24-30% mark. Surely, you deserve to know why are you being charged an excess rate. Are the dealerships not playing fair and looking to take advantage of you? In truth, there is a good reason why the rates are higher in BHPH dealerships and it is all as per the market norms.
The close relationship between credit scores and interest rates
Both banks and BHPH dealerships are players in the US financial market. And both follow the relationship between interest rates and credit scores. The higher your credit score, the lesser risk you carry of defaulting on your debt, and the interest rate you pay on your auto loan falls accordingly as it is widely accepted as the measure to combat risk. Banksdo not process loan requests from applicants with poor credit scores. They do not take the risk and thus, do not need to hand out interest rates greater than 5-6%. A top buy here pay here in Greenville, SC approves auto loans to bad credit score holders. By the relationship rule, BHPH financing houses charge a high interest rate.
The rate deciding factors
Apart from your credit score, a few other factors determine the interest rate that you pay on your auto loan. One, your credit report decides your actual risk quotient. Any reputed buy here pay here in Greenville will look into your credit report to determine your debt to income ratio to understand your likelihood of covering the credit premiums. Again, the greater the risk, the higher the rate. And two, the span for which you intend to draw out the loan for determines the interest rate you pay as a longer period is equated to greater risk. Banks play it safe on all accounts. If you are a risk of credit default, they ask you to bring a co-signer. BHPH dealerships take on these risks and allow you to finance your car in return for a higher interest rate.
It’s in the business model
The business model of a buy here pay here in Greenville, SC revolves around helping customers with poor credit scores. People who cannot approach banks but need a used car. Combat the drawbacks of high interest rates by buying cars within your paycheck capacity and sticking with 3-year loan spans. The entire concept is designed to enable you to get your personal ride without the hurdle of finances coming in between. So, embrace buy here pay here, visit the top dealership, customize the financing plans, and own a quality used car.