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As one can quickly guess from its name, the third chance auto loan is a solution offered by financial institutions for people who have a bad credit rating but want to be granted the financing of their new automobile. This third chance aims to propose financing plans. Let’s see if third chance auto credit is just a solution or a real opportunity.


Third Chance Credit is the term for various auto finance programs that are offered by conventional financial institutions. These programs are offered to people whose request for financing is considered high risk and whose traditional financing programs are not accepted. Indeed, each request for financing of a car loan requested from a conventional financial institution is subject to a decisive evaluation which involves observation, among other things, of the history and credit rating of the loan applicant.


A financing program called third chance can for example, and in many cases, consist in first making a car rental. Because the financial institution starts by leasing an automobile, it takes much less risk of having its repayment not paid because it remains the owner of the vehicle until the borrower has paid off their loan in full. In the majority of cases, depending on the contracts offered by each financial institution, the residual value is low and the borrower can buy the automobile at the end of the term of the loan. The majority of requests made to financial institutions are accepted because the banks take almost no risk. At worst, they can resell the vehicle. For this third chance to be accepted, in most cases, it is then necessary to pay an amount that will pay for the depreciation of the automobile. This corresponds to approximately 20 to 25% of its initial price, which will then be deducted from the total rental amount.


Advantages: Because the third chance is always an open contract, it is possible to stop it by redeeming it entirely at any time. In addition, this type of financing is considered a commitment that increases your credit rating with each payment made to your financial institution.

Disadvantages: These financing programs are often very expensive but also incentive. Indeed, you must always be careful to choose an automobile whose price will respect your budget in the long term so as not to go into debt with a financial institution for too many years. Plus, these financing programs charge interest rates that are typically around 30%, which can quickly bankrupt you. Finally, financial institutions often sell additional insurance and guarantees to drive up the final bill.

Because it generates a lot of additional costs, third chance credit is not always the best solution available to you to be able to finance the purchase of a new car. Another alternative is to apply for a short-term bad credit loan  from a private company specializing in personal loans that will lend you a small amount in the short term without doing a credit check but only according to your repayment capacity. More advantageous, these personal loans allow you to aim for the acquisition of a car that respects your budget and to have interest rates lower than the third chance credit with financial institutions.