When you’re looking to purchase a vehicle there are three Avenues you can take. Whether you choose to finance, lease, or even purchase it out cash the dealership will have a look at your credit report to ensure that your credit score is sufficient enough for them to lend you the vehicle. So it does beg the question what the minimum credit score for a car loan is and whether or not you’d be able to get that car loan.
The reality of things is there isn’t any harder fast rule about what the minimum credit score is that you would need for a car loan. Essentially it all depends on the lender to get that you’re going to who would be willing to give you that car loan you’re seeking. Like everything else the better your credit score the more of a chance you’ll have to get a prime rate on your vehicle.
He knows that you’re worried about your low credit score preventing you from getting that car of your dreams but rest assured remember that you’re dealing with a car dealership. Their job is to sell so don’t underestimate them, you may walk out a happy customer.
When the lender decides to look at your credit score to see if you’re eligible for the car loan it’s simply to determine what type of interest rates you’ll be given. It may be a long shot, but we recommend pulling your credit report and checking to see any inaccuracies on it. If you notice anything of incorrect definitely have them removed because it can significantly impact your credit score.
But overall your credit score can affect your ability to receive an adequate car loan in two different ways. Let’s have a look at exactly how this is done.
Getting a Loan from Some Lenders. When lenders look at your credit score depending on where it sits on the scale you may have an easy time getting approved for a car loan or a difficult time. If you sit on the lower end of the spectrum you can reduce the visibility you have on the market when you’re looking to get the car loan. Whereas if you’re on the higher end of the spectrum, you’ll have the vast majority of benefits when you’re looking for the car loan.
In short, regardless of your credit score, you can get approved for the car loan it just means that you may not have that much of a selection when it comes to lenders when compared to a higher score.
Your Interest Rate. The general understanding of a credit score it’s as follows, the lawyer credit score means more of a riskier candidate you are where is compared to a higher credit score means you’re a less risky borrower. This does translate directly to you looking for a car loan. This directly affects the interest rate of the loan. Depending on the lender and your credit score, you can be paying a lot more interest than if you were to have a prime credit score. For example, if you are not a prime borrower you could be looking at anywhere of 6% and above interest rates, and if you were a prime bar or you may be looking at anywhere between 4%. In retrospect, 2% doesn’t seem to be quite a bit of an increase, but when you’re dealing in large sums of money 2% can make all the difference. If you would have just average it out across the lifespan of a car valued at $100,000 granted everything else was equal, you may be looking to pay a few thousand dollars extra just because you have a subpar credit score.
Situations like these are why we highly recommend you take the time to repair your credit and Look to increase over time. We outlined a few steps of how you can benefit from getting a car loan regardless of your credit score.
Cash Buyout. For many people, I may seem like you’re tying up a lot of money into a depreciating asset. But in the long run, if you calculate the money years looking to save during the time of the loan due to your interest rate, cashing out the vehicle might be the best bet. So if you have the resources to purchase the vehicle outright we recommend you do so.
Down payment. So if you were put in a situation where you’re paying quite a bit of interest and it’s a bit uncomfortable for you that’s totally fine. One thing you can do to help your situation is Save for a down payment. Making a down payment to your vehicle ultimately reduces the amount you’re looking to borrow, where in turn also reduces your interest rate.
Co-Signer. If you don’t have much of credit history, or you’re someone who hasn’t been able to build a credit history as of yet. One way you can get a loan for your vehicle is having a co-signer. You’ll be able to get approved quickly for the car loan, and over time once you start building your credit score will be able to remove the co-signer and have the loan entirely in your name.
Refinance. This is something you do after you get approved for the loan, make it a priority to build your credit score over time. Look at some credit repair services to see if you can better your score. Once you’ve done that you can contact the lender and let them know that your credit score has changed, and there’d be more than willing to refinance the amount of your loan so you’d be paying less on interests.