What Credit Score Do I Need To Get Zero Percent Financing?
September 14th, 2012 | Author: Stephanie
[G]enerally, you can only get “zero percent” financing on new vehicles. However, since the economic downturn of 2008 auto dealers have been much stricter about offering true interest-free loans. After all, even people who were once making a high six-figure income have become suddenly unemployed. Interest rates are a way for a lender to mitigate its financial losses if the customer defaults on a loan. While an auto lender of course can repossess a vehicle and resell it, often the company is still out of a significant amount of money.
Your credit score should be between 700 and 850 to qualify for a zero percent financing deal. However, watch out for hidden expenses! Some auto manufacturers will demand a hefty down payment or that you cover the cost of tax, title, and tags upfront. Also, remember that many zero percent financing deals are good only for three year loan terms. If you cannot afford to pay in excess of $600 a month for just the car payment, skip the zero financing and go for a five year or longer loan. Yes, you will pay more money over the life of the loan. But your financial hardships and risk of defaulting on
the loan will be dramatically reduced.
If you do not have a high credit score, you can take a few steps to improve your credit rating and qualify for better auto financing deals. First, are all of your credit card balances lower than about 40 percent of your available credit limit? Basically, if you have $10,000 of available credit and owe more than $4,000 on the cards then your credit score suffers. The less debt you have, the better. Also, are some of your accounts pretty new? This could be dragging down your credit score; you should wait at least another year for your credit score to increase as your accounts age.
Sometimes, credit card companies send potential customers “zero percent” card offers. This does not mean you will always pay zero percent interest. Read the fine print and realize that if your credit score is under 650, you probably will not qualify for the deal. Generally, a zero percent credit card applies only to purchases or balance transfers for a finite period of time after opening the new account. The general time frame is 90 days to six months, though people with the very best credit might get a 12 month zero percent deal. However, such cards are getting close to non-existent especially in this economic era.