Prime Loan vs. Subprime Loan from Finance Company Chart

Finance companies often specialize in offering subprime loans – loans to people with poor credit. Subprime loans come with higher annual percentage rates than prime loans. If you can only get a subprime loan through a finance company, it may be preferable to work on improving your credit score first and hold off on getting a new car until you can get a loan with a better APR. This example shows the difference between a loan at 5% APR (a good rate) and one at 15% APR (a rate often offered by finance companies):
 
  Prime Loan Subprime Loan
from Finance Company
Amount Financed $16,000 $16,000
APR 5% 15%
Loan Period 60 months 60 months
Monthly Payment $302 $381
Total Interest Paid $2,116 $6,838
 
As you can see, you may have to pay quite a bit extra in interest with a subprime loan – $4,722 in this case.