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Shopping for auto loans when you have bad credit can be disappointing and frustrating. The auto loan rates on a car loan for a buyer with bad credit can be high, leading to large monthly payments or a hefty required down payment. Bad credit car loans can be obtained by dealerships and direct lenders, and it is important to shop around for them just like regular car loans. This will ensure you get the lowest auto loan rates available, even with bad credit. Learning more about auto finance loans and how they work can help you to obtain a sensible car loan that still meets your monthly budget. Here are detailed answers and information pertaining to the most frequently asked questions about bad credit car loans.
What is Considered ‘Bad’ Credit for Auto Loans?
A score of above 740 will generally get the best car loan interest rates available. Any credit score that is under 629 is generally considered a low score, and will be subjected to high auto loan interest rates. The credit score is one of many factors taken into consideration by the dealership or direct lender when loan terms are arranged. The current auto loan rates, purchase price of the vehicle, down payment available, geographical location, and buyer’s current salary will all also be analyzed for the loan.
What Will My Car Loan Interest Rates Be With Bad Credit?
The auto loan rates available for car buyers with bad credit may vary slightly between different creditors. That’s why it’s important to shop around to different sources before agreeing upon a loan and its terms. For car buyers with a good credit score, the usual vehicle finance interest rates range from two to five percent. A credit score that hovers around the low mark of 629 can expect to have higher interest rates, which may be from six percent to twelve percent. For those car buyers looking into bad credit car loans with a poor score lower than 580, auto loan interest rates may be set at twenty percent or higher.
How Can I Get a Good Car Finance Deal With Bad Credit?
If you are looking into buying a car, but have poor credit, it may be best to wait until you can repair your score. Taking an extra six months to a year to pay off bills and debt and increase your credit score can save you in the long run when purchasing a car. If you’re in a dire situation and a car is needed, take your time finding the best deal on the car first. A lower purchase price on the vehicle and the ability to take advantage of dealer incentives or sales can also save you on the car loan. You may find that used car loan rates are even higher than buying a new car, but take into consideration the purchase price of the used car. It’s worth taking a moment to do the calculations on the monthly payments first before deciding if a used or new car is best for your budget.
Shopping around your car finance options can also be helpful when you have found the car you want. Many direct lenders can tell you their current auto loan rates if you already know your credit score without having to fill out any paperwork. This can give you a chance to compare rates and decide the best creditor for your car loan. Keep in mind that the credit bureau will only count each credit check for an auto finance loan by a creditor as one hit to your credit as long as they are all done within two weeks of each other. Make it a point to complete all your auto loan shopping at one time so you can avoid multiple negative hits to your credit each time a creditor pulls the report.
Pay close attention to the span of the vehicle finance loan and try to choose the shortest loan you can. While this will make your monthly payments higher, it also means you will pay less interest. Bad credit car loans have extremely high interest rates, forcing car buyers to pay more interest than loan amount. However, the shorter the time period of the loan is, the more debt you will pay down each month.
Saving up as much money as possible for a down payment can also be helpful for bad credit car loans. If you can offer a large down payment, the loan amount will be much less, allowing your monthly payments to go down a bit. While putting down a hefty sum may not help with your interest rate, it will help with the length of the loan because the amount to finance will be less.
Obtaining auto loans with bad credit can be tough for car buyers on a budget. By shopping around auto loan rates, contributing a substantial down payment, and searching for the best deal on a car, you can find an economical vehicle finance offer that will work for you.