What Credit Score Is Needed To Get An Auto Loan
Unlike other credit situations, auto loans dont require a minimum credit score. Instead, you need to show that you can afford the monthly payment schedule. Lenders also look at other factors, including:
- Do you have any current or recent past-due accounts, collections, or charge-offs?
- Are you currently in bankruptcy proceedings?
- Are you able to make a down payment?
- Are you willing to make payments more frequently than once a month?
- Are you willing to pay in person, at the dealership?
- Do you have a reliable source of income?
- Are you a U.S. citizen or resident, at least 18 years old, with a valid Social Security number, email address, phone number, and active bank or credit union account?
The reason these lenders can overlook credit problems and a bad credit history is that, unlike an unsecured personal loan, the vehicles they sell act as collateral to secure the loans they originate. If you start missing monthly payment deadlines, its likely the dealer will repo the car.
Moreover, if the car was damaged after you bought it, the dealer may take you to court to recover the additional costs.
Best Auto Lenders For Small Businesses
The following lenders offer business and commercial auto loans that are suitable for a variety of small business needs. These business auto financing options include bank loans, SBA loans, and alternative online lenders. This list also contains good credit, bad credit, and fair credit business lenders.
Can I Get A Car With A 500 Credit Score
The FICO credit score, one of the most widely used credit scores, ranges from 300 to 850. A score of 579 or lower is considered bad credit.
A subprime lender will likely consider an applicant with a 500 credit score. A lending network may be the best choice for people with bad credit because it helps applicants prequalify and then searches for lenders willing to offer loans to such borrowers. And even someone with a 500 credit score may receive offers from multiple lenders.
Lending networks dont check your credit score, so lenders may not learn of your low credit score until the next phase of the loan process, when the lender will likely do a credit check. Until then, you can apply to many lenders through the lending networks without affecting your credit score.
Many lenders and lending networks for people with bad credit are more concerned with your income. Auto Credit Express, for example, requires borrowers to have $1,500 in monthly income to qualify. Others, such as Credit Acceptance, consider people with open bankruptcy on their credit reports and offers them car loans based on unemployment income.
A low credit score may also be less of a problem for a car loan because an auto loan is a secured loan. The car you buy is collateral for the loan and can be repossessed by the lender if you dont make loan payments or default on the loan entirely.
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Q5 Can A Car Loan Impact My Credit Score
Yes, auto loans can impact your credit score. However, the auto loan can positively or negatively impact your score, depending on the timing of payments.
When you apply for a loan with different lenders, your application, also known as a credit inquiry, is attached to your credit report. This indicates a certain lender has access to and checks your report during the application process.
This report stays in your credit report for two years. However, the impact of the record is erased from the credit score in a few months.
Lenders report the timing of your payments to the lending bureaus, and this information impacts your credit score for a long time. Moreover, payment history takes up 35% of your credit score. Therefore, you should make payments on time.
How Much Money Can You Borrow With Bad Credit
A lender typically determines your loan limit based on your creditworthiness and income. The largest limits are reserved for high-qualified borrowers. If you have bad credit, you can expect to receive near the minimum loan limit your lender offers. If you need to borrow more money, consider improving your credit score prior to applying.
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Good For Interest Rate Discounts: New Roads
Why New Roads stands out: It can be tough to qualify for low rates when you have poor credit. New Roads, the direct lending division of Consumer Portfolio Services Inc., offers interest rate discounts on certain certified pre-owned and new-car models that can reduce interest charges.
Heres some more info about New Roads auto loans.
- Loan types New Roads offers new- and used-car loans, lease buyout loans and refinance loans.
- Availability New Roads auto loans are available in only 30 states.
- No down payment required New Roads doesnt require a down payment. But without one youll need to finance a larger amount, and youll likely pay more interest over the life of the loan.
- Bankruptcy and repossession New Roads considers applications from people who have a repossession or bankruptcy on their credit reports.
- Co-buyers New Roads allows you to apply with a co-buyer.
Best For New Cars: Pnc Bank
- From dealer: 2.14% to 14.54%, From private party: 4.64% to 21.04%, Lease buyout: 3.64% to 20.04%, Refinance: 2.64% to 19.04%
- Loan range: $5,000 to $100,000
- Loan length: 12 to 72 months
- Available in all 50 states
Read Insider’s full review of PNC Bank.
PNC offers great rates for borrowers who have good credit. The bank offers financing for cars model year 2014 or newer if you want to buy an older car, you won’t be able to get a loan through PNC.
Borrowers with a poorer credit history may find it hard to qualify at all or might be saddled with high interest rates.
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Why Take A Bad Credit Car Loan
Got bad credit and not sure if you should take that bad credit car loan? We outline the pro’s and con’s of bad credit car loans and offer our professional advice on why you should seriously consider using a bad credit car loan to help you fix your credit challenges.
Bad credit car loans – Cons
If you have experienced credit issues in the past, lenders are going to be more cautious about both the amount they are prepared to lend you and the rate they are prepared to offer. Your credit history indicates hat you are a high risk customer so expect higher interest rates.
Most lenders will also place restrictions on the type of vehicle you can and cannot purchase, with the preference to be around newer vehicles. While every lender is different a rule of thumb is the newer the better. Lenders want to know that in the event of default they can repossess the vehicle and recoup their money.
Finally expect the lender to request more detailed loan documentation in the form of extended bank statements, tax records and / or payslips.
Bad credit car loans – Pros
With higher interest rates, vehicle purchase restrictions and obviously higher repayments you are probably thinking what are the pros of accepting a bad credit car loan.
Sure the rates and repayments on offer are far from ideal but accepting the loan and servicing it without default for 12 months is the fastest way to repair your damaged credit score.
Review Your Credit Report
Before you start car shopping, access a free copy of your credit reports and review them for accuracy. Your credit reports have a significant impact on your ability to borrow money for a vehicle after all, the information listed contributes directly to your credit score.
Even if everything is accurate, you need to know exactly what information the car salesman or lender is looking at when reviewing your financing application.
While you certainly hope youre dealing with a trustworthy individual, many dealership finance managers use pressure tactics based on deceit.
If you dont know your credit history, you dont know if any allegations made against you are actually true, and you could end up with higher interest rates.
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Do Credit Unions Offer Car Loans
They do indeed, and often on very good terms. Credit unions are owned by and operated for the benefit of their members. They are usually nonprofit institutions, which means they can afford to charge less interest on car purchase loans and offer higher returns on savings products.
One highly rated credit union is Navy Federal. It offers auto loans with low rates , 100% financing, and exclusive military discounts to its members.
Most credit unions limit membership in one or more ways. You may be qualified to join by virtue of where you live, work, volunteer, or worship. Youll have to establish an account before youll be eligible for a loan from a credit union.
Things You Can Do With Your New Pre
Tire Repair & Replacement
Now, you wont have to use your tires till they lose their grip and traction. Once you notice that they arent performing as expected, you simply need to wheel your vehicle to your chosen workshop, have them look it over, and either repair or replace the tires immediately. Well attend to the financial aspect of the repairs for you.
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Increase Your Chances Of Getting Approved
How Can I Get Approved For A Loan With Bad Credit
The lending websites we feature in the article all specialize in finding loans for folks with bad credit. These lenders have carefully engineered their loan products to provide themselves with enough protection to permit the underwriting of risky loans.
Depending on which company you connect with, you can expect any loan offer to be for a modest amount and a high APR.
When lending to consumers with bad credit, the loan providers often look to the applicants income. Typically, the lenders want to see at least $800 to $1,000 per month in income after taxes. That can come from a job or from other sources, such as Social Security or disability insurance.
A good strategy for landing a loan is to start with a secured credit card. Even if its a modest initial deposit , you can use the card to help improve your credit score. The secured-card providers in this article all report your monthly payments to the three credit bureaus: TransUnion, Equifax, and Experian.
You can help your credit score by paying on time, paying more than the minimum balance, not exceeding your credit limit, and paying off the entire balance as quickly as you can. As you establish your responsible use of the account, you can request a higher credit limit and deposit more cash into the security account.
After six months to a year, you may be eligible to trade up to an unsecured credit card. Eventually, your good credit habits may enable the providers of personal loans to make you an offer.
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Can You Get An Auto Loan With Bad Credit And No Money Down
Most of the reviewed lenders can offer bad credit consumers auto loans, even with no money down. However, it is in your best interest to make a down payment the bigger, the better.
Another strategy to improve your credit situation is to enlist a cosigner for the loan. A cosigner provides extra confidence that the bad credit loan will be repaid, allowing the dealer to follow its strong inclination to close the deal. This is because the cosigner is equally responsible for making payments if you default on the loan.
You may find that many of the dealers that welcome consumers with a bad credit history are buy here, pay here dealerships. These dealerships offer self-financed loans, which means they dont have to get the permission of some bank, credit union, or other financial institution to make the loan. This kind of car dealership is among the most likely to offer a no-money-down loan.
Can I Get Dealership Financing With Bad Credit
Yes, four out of the five lenders in this review can provide you with dealership financing despite a bad credit score. The first three, Auto Credit Express, Car.Loan.Com, and MyAutoloan.com, are matching services that work with networks of lenders, including car dealerships. They may be able to arrange dealership financing even if your credit is poor.
Buy-here-pay-here dealerships offer direct loans to customers. That is, these dealerships use their own internal funds to finance loans. When you visit one of these dealerships, the finance officer will sit with you and explore your loan options.
When the financing comes directly from dealerships, they want you to be able to make your payments. Therefore, you arent likely to find these dealerships pressuring you to purchase more car than you can afford. And, you have the satisfaction of knowing the loan fits within your budget.
That makes dealership financing a win-win for you and the dealer, whether you think you have the credit score to buy a car.
You should not overlook the advantages of third-party financing, however. These are loans that are pre-approved by banks, credit unions, and other financing companies, such as RoadLoans.com.
The matching service websites also offer these types of direct lenders. When you receive a pre-approved loan, you have the option of shopping wherever you please so that you can nail down the best deal.
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Applying For A Car Loan With Bad Credit
Even if you have bad credit, you have several auto financing options to choose from you just need to find the right lender for your situation.
There are four types of lenders you can reach out to, including:
- Online lenders: Online lenders are convenient because you can find out whether you have been approved for a new loan within minutes. These lenders may also provide you with a lower interest rate since they have lower overhead costs. Online lenders are also more likely to offer preapproval so you can get an idea of your loan payment and interest rate before you make a purchase.
- Banks: Many national and local banks offer car loans. However, some banks may only allow you to get a loan through dealer-arranged financing.
- : Most credit unions offer car loans with low interest rates. You may be able to apply for a car loan directly or through a dealership. The only downside is that you may have to be a member of the credit union to qualify for its offerings.
- Car dealerships: Many dealerships offer their own financing options for car buyers. And if they dont, others will shop around for you through dealer-arranged financing.
Top 5 Lenders Who Offer Auto Loans With Bad Credit
Banks Editorial Team
Banks Editorial Team
Here are our five top lenders that offer auto loans with bad credit. Bad credit isnt necessarily a deal-breaker if youre in the market for a new or used vehicle. While making bad financial choices in the past may once have limited your options, today many lenders are willing to provide guaranteed auto loans to borrowers with less than desirable credit scores.
While you can still qualify for an auto loan if your credit is damaged, dont expect to see the great rates that lenders advertise. Higher interest rates will reward a lender for taking a risk on a questionable borrower with a spotty credit history. But your bad credit wont, in most cases, prevent you from buying a vehicle.
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Why Lenders Take A Chance On Auto Loans
Unlike personal loans, which may be used for non-tangible purchases like education, travel, or paying off debt, car loans have a valuable asset that can serve as collateral. If you fail to pay back your loan, lenders can seize the vehicle and sell it to recover their money. This means its easier to get auto loans with bad credit than other type of loan.
Also, many lenders recognize that personal transportation is a necessary expense for school or work. Youre more likely to make payments on your auto loan than your other expenses so you dont lose your ability to get where you need to go. For these reasons, banks and financial institutions are more willing to extend credit to you, even if you have a poor history.
Determine How Much You Can Afford
Think beyond your monthly loan payment as you figure out how much you can afford to borrow. Consider the costs of car ownership such as fuel, regular maintenance, auto insurance, and any parking expenses or property taxes and factor them into your budget.
It may be tempting to stretch your loan term to six or seven years in exchange for a lower monthly payment. But keep in mind that a longer auto loan term means you could end up paying more in interest over the length of the loan and you increase your risk of becoming upside down on your loan, which can create some challenges when its time to sell or trade in your car because youll owe more than its worth. Our auto loan calculator can help you estimate how much youd pay in interest on a car loan.
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