What Is Special Finance?

The definition of subprime or special finance (SFI) can vary widely from dealership to dealership. Generally, Special Finance is defined as the ability to get credit for customers who typically are unable to finance a vehicle through their primary or conventional lenders. Typically, these customers have a limited credit file or credit problems that make it undesirable for the primary lenders. Let's look quickly to common problems.

Credit Score: Many lenders use credit scores to set the special Finance candidates. Typically, banks consider a score below 620 as territory Finance sub-prime or special. While this is not a hard and fast rule, which gives us a starting point to work. Many lenders use other criteria, along with credit score to determine the value of a credit applicant. Following recent or bankruptcy, or a rash of late payments in recent months may render moot a high credit score, as well as a limited credit bureau that contains all brand new accounts with low limits.

Repossession: The vehicles that for one reason or another were returned to the creditor.

Voluntary repossessions are those that the customer return the vehicle to the creditor in order to avoid having to pay any fees recovery.

Involuntary repossessions indicate the value had to send someone out to physically locate the vehicle.

Deaths: Federal arquivamentos that allow a consumer to obtain judicial relief from their debts. Changes in bankruptcy law make it harder to file.

Most borrowers fall into Chapter 13, also known as a salaried Plan (WEP). The debtor gives his money to an administrator, allowing you to keep a small amount to live. The balance goes to your creditors to pay your bills. Usually, the court requires 3-5 years of payments before "download" the debtor's balance of your debts and allows you to start over.

"Chapter 7" bankruptcy to allow the judge to grant the debtor immediate repair of your debts. The court effectively removes all balances and gives debtors a fresh start. New laws imposed on the courts to consider income and ability to repay the debt before granting any movement.

Charge offs: Accounts of the value must occur at the point in the life of a debt where the lender has given up trying to collect the debt, and wrote it. Generally, these accounts charge off and collections end. The lender can sell your accounts charged off a debt collection agency for pennies on the dollar, for any amounts the collection agency receives the debtor is money.

Delay in payments: The rate of credit agencies respond as paid on time, 30, 60 or 90 days late. Obviously, 90 days late is significantly worse than 30 days, and more often than not takes the mind off the dreaded snake.

First time buyers (FTB): These are typically the candidates who have a thin credit file or no credit history at all. Often these are young, newly graduated employees who can benefit from a captive program value. In many cases, these clients may be recent immigrants to the United States, which may or may not have credit in their homeland. Some may have a number of taxpayer identification (NIF) or W-7, instead of a Social Security number. Or do these candidates fall Special Finance is a matter of debate in many businesses, and we will address this issue a little later.

Time to Table: A credit file limited, having only a few small accounts opened for a short time. While these credit bureaus will show a relatively high score, the quality of the accounts (stores or local merchants, credit cards, accounts with credit limits minimum) makes it difficult for a lender to evaluate the candidate's character. Usually, these files have a few credit accounts opened for a short time with a history of limited or no payment.

Privilege Tax: The Internal Revenue Service or a state or local tax authority places a lien on real property of the debtor. If the debtor has no property, a guarantee of paper filed, which allows the tax authority to provide any property of the debtor may acquire.

Public Records: garnishments, judgments or other matters that have become an item of public record, due to a court order. Included in the records here may be a bankruptcy or a privilege tax or federal.

Credit Counseling: Often, a precursor to filing bankruptcy, credit counseling is a process in which a debtor enters into a contract with a credit counselor or agency to provide partial payment of outstanding debts. Typically, these accounts are approaching the "critical mass" to make a charge-off. The agency negotiated a payment plan with the lender, and each month, the borrower pays an amount of money for the agency, which pays the negotiated amount each value. Most agencies require that the client agrees not to extend its debt while enrolled in the program, and lenders typically will not consider a candidate who is actively enrolled in credit counseling.

Adjusted accounts: are accounts in which the lender considers the account closed, but the debtor has paid less than the total amount owed to credit. The lender agreed to accept any reimbursement they were able to collect on the debtor balance, which was reduced by removing a portion of the interest owed on the account in order to collect as much as possible first. These accounts are usually seen as worth just under a load off, and tend to indicate the candidate's inability to meet its obligations.

So the deal is?

These questions may seem strange and yet are very important to answer. What is the business can change with each client to work!

If well managed, "sales" in the car industry falls three separate companies:

Working with clients who have credit "A" (Prime), is in fact the sale of new and used vehicles.

Working with clients who have "BD" credit (Special Finance), is the first in the business of loan origination.

Working with clients who have credit "EZ" (Buy here pay here), is in the business of collecting.

So, what company? Many businesses make the mistake of believing they are just in the business of "selling new and used vehicles." The problem with this is that many of their customers fall into one of two non-major categories of credit. If you are working with clients who have less than perfect credit, you should also see on the "loan origination" and / or "collection" business.


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