We’ve all seen them: ads from car dealerships that are selling the dream by promising a second or third chance at credit. But these offers are often not financially appealing.

In this article, Assurances Multi-Risques wants to give you all the information you need about this type of credit and the impact it can have on your car insurance so that you can make an informed decision.

Who are second and third chances at credit for?

Life isn’t always easy; people lose their jobs, become unemployed, accumulate debts, have collection problems, etc. Sometimes, despite our best efforts, bad luck comes our way and affects our credit score.

When we talk about second or third chance credit, we mean a non-traditional loan, or “substandard” or “non-standard” creditors. This type of loan is meant for people with a poor credit rating whose regular financial institutions refuse to finance a project, such as buying a car.

But when used correctly, a second chance at credit when buying a vehicle can help you rebuild your credit history and credit report.

Substandard creditors: the other side of the coin

Second chance loans are most often obtained from specialized finance companies or auto lenders. Very few banks offer second chance credit, which limits your options regarding the interest rate and the term of your loan.

This means you will be forced to pay high interest to cover the risk you pose to the creditor. The same principle applies to your car insurance, but in a different way! Insurers always calculate the risk of you not paying your premium (hence the analysis of your credit report) or of having an accident (based on your claims history).

The impact that second chance credit has on your car insurance

When you choose your car insurance, the person on the other end of the phone (the insurance agent or broker) will ask for several pieces of information, including the name of the creditor who financed your car loan. This is when things can go south. Let us explain.

If your interest rate is higher than 10%, chances are you will be refused insurance in the standard market. And the fact that you used non-standard credit shows how bad your credit score is. According to some statistics, people with below-average credit scores are more likely to make claims in the future, and that’s a risk that many insurers are unwilling to take.

But that’s not all. There is also the amount of the premium.

To get car insurance after taking out such a loan, you will probably need a specialized insurer. How can you find one? It’s simple! All you have to do is contact an insurance broker specializing in “non-standard” insurance, like Assurances Multi-Risques.
We work with insurers who accept applications that are refused in the regular market. But all this comes at a price. Your car insurance premium will inevitably be higher, but at least you’ll be well protected!

We often need a vehicle for our daily lives, especially to go to work. If you don’t have a good credit score, you may need to take out second or third chance credit, and we certainly understand that.

That’s why, as independent brokers, we always make sure we offer all our customers the best coverage at the best possible price, no matter what their situation might be.