Do i need full coverage insurance for a subprime auto loan?
Yes, you need full auto insurance for a subprime auto loan. Here’s what full coverage typically involves, why you need it, and how to look for subprime financing options.
Full coverage and subprime financing
Your auto lender is actually the one that requires you to purchase comprehensive auto insurance for your financed vehicle. In almost all cases, a subprime lender will ask you to fully insure your car until you pay off the loan.
Once paid, you own the vehicle and can choose the minimum insurance coverage your state requires, since you are no longer required to insure the vehicle as per your lender’s stipulations.
Comprehensive coverage typically includes:
- Liability insurance – Covers property damage and medical bills for injured people if you are responsible for a traffic accident. Required in almost all states whether you finance or own the vehicle.
- Collision insurance – Covers cars damaged in an accident, no matter the fault. Usually covers repairs up to the value of your vehicle at the time of the accident. Carry a franchise.
- Comprehensive insurance – Covers damage to your car resulting from non-motorized vehicle accidents such as damage caused by hail, theft, fire or collision with an animal. Carry a franchise.
When looking for full coverage auto insurance rates, the insurance agent is very likely to know what coverage you need when financing. If you know which subprime lender you are financing with, you can ask them about the minimum insurance requirements before choosing a policy.
When you are about to finance a vehicle, it is a good idea to start shopping around not only for different vehicles but also for insurance rates! Most dealerships also require proof of auto insurance before you can drive a car, so it’s a good idea to get some quotes before you take delivery of a vehicle.
Why do subprime lenders require full coverage?
Subprime lenders and other auto lenders need full coverage auto insurance because they want the vehicle to be covered as much as possible for the life of the auto loan. Since the vehicle is owned by the lender until you pay everything off, they want you to protect the value of the car.
If you don’t get full auto insurance while you finance, it could lead to repossession as you violate the terms of the lender’s contract. Lenders can also issue you with forced insurance. These auto insurance policies are placed on a financed vehicle if you do not have adequate coverage or if your insurance ends.
It’s also important to remember that your insurance premium depends on the age and condition of your vehicle. As a general rule, newer cars are more expensive to insure because they have more expensive parts that need to be replaced if something goes wrong. Whether or not your car is equipped with safety devices, such as a rear view camera, can also influence your insurance costs. In some states, your credit score has a say in the cost of your insurance, and the area in which you live may increase or decrease insurance premiums.
With all of these different factors at play, be sure to shop around with several insurance companies before settling down with a policy.
Apply for a subprime car loan
Once you know the insurance coverage you need for a subprime auto loan, you can start looking for a lender!
Subprime lenders are registered with special financial concessions. You apply for automobile financing to the special financial director, who forwards your application and documents to their lending partners. If you qualify for financing, the subprime lender sends out a payment call, which is the maximum car payment you qualify for. From there, you choose a vehicle that matches your eligibility and needs as a driver. And before you can take delivery, make sure you have proof of auto insurance that meets the lender’s stipulations.
Find a dealer to work with
Finding a dealer who has signed up with subprime lenders is not always easy, as many dealerships do not advertise their lending partners. However, here at Express auto loan, we have located special finance dealers all over the country and we want to guide you to one in your area.
Start now by filling out our free auto loan application form, and we’ll immediately get to work finding a dealership that helps bad credit borrowers.