What is a Special Finance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 February 2020
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A special finance is some type of lending arrangement that is aimed at helping borrowers with little or damaged credit to obtain financing for the purchase of a specific asset. Financing of this type is often utilized to aid individuals who do not qualify for other types of loans owing to the current condition of their credit ratings. Since lenders who offer special finance deals are assuming a greater degree of risk, the terms and conditions related to the loan are typically not as competitive as the terms consumers with higher credit ratings can command.

One of the most common examples of a special finance arrangement is found with the options for financing the purchase of a vehicle. The exact structure of the financing will vary somewhat, depending on how the lender chooses to provide the financing. For example, a used car dealer offering this type of loan arrangement may choose to conduct the financing in-house, rather than arrange the loan through a financial institution.

In this scenario, the borrower will likely be required to provide proof of steady income that meets or exceeds a certain monthly minimum. Down payments are often very reasonable, which is often attractive to anyone that has undergone a period of financial reversal. Payments may be made weekly or biweekly, rather than monthly. As with any special finance arrangement, the interest rate applied to the loan will be somewhat higher than the current average interest rate for the area.


There are also lending institutions that provide special finance loans to consumers. In some cases, these institutions will pre-qualify a consumer, agreeing to finance the purchase of a vehicle up to a certain amount. This makes it possible for the consumer to know in advance how much financing he or she can obtain before ever beginning the task of locating a car or truck to purchase. As with the dealer financing, the interest rate will be higher than the average rate for the city or town in which the lender is located.

It is important to note that very special finance lenders offer financing on new vehicles. This is especially true for car dealers. Many prefer to focus on financing good quality used cars that have relatively low mileage and comply with local safety standards. Part of the reason for this is that the vehicles retail for considerably less than new cars and trucks. Along with charging the higher interest rate, financing a smaller loan also helps to keep the degree of risk assumed by the lender within reasonable limits.



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