Getting prepared for a car loan many customers wonder about requirements for borrowers. Linda Wilson from Pittsburgh, Pennsylvania has the same questions for our experts: “I am going to buy a car and need to apply for a loan. I wonder about the credit score needed for auto loan to buy a car at good interest rates.”
“I heard that lower rates are available for people with high credit scores. My FICO score is 695, I would like to find out what chances I have.” Linda’s issue is very typical for today’s customers, we get many messages of similar content. So it will be useful to answer these questions and explain the requirements of lenders.
The current situation on the financial market is far from good that is why the most of lenders have bigger requirements for those who would like to obtain a car loan at beneficial rates. However, there is no minimal credit score needed for auto loan to buy a car. People with practically any score can qualify for such type of credits. The matter is how big down payment you will need to pay and how big your interest rate will be. People with bad credit (480 and lower) are able to apply for a car loan, but they will be offered with much more expensive conditions that those with a credit score 700+.
If to compare auto loan
industry with mortgage loan sphere, the latter one is much less flexible. The standards of car loans are much more diversified. For instance, there are few abilities to qualify for a mortgage with reasonable interest rate and other conditions with a credit score lower than 650. However there is no problem to get a car loan on comparatively beneficial terms.
Moreover, there are special services for borrowers with bad credit. Of course it will be better to raise credit score first and then apply for a car loan, but if you need a car right now, you can use one of bad credit car loans offered on the market. One of such services is DriveTime.com. Remember that having a higher credit score you can save thousands of dollars on regular loan payments. That is why you should analyze what is better for you: to pay more on interest rates or wait a year for stabilizing your credit history and increasing a credit score.
If you have stable income and you are sure in your solvency, getting a car loan with bad credit can be beneficial in terms of improving your payment history. Making all payments on time you will get higher credit score. Of course it will cost you more than a car loan for normal credit, but this is a good chance to recover from some credit faults you’ve made in the past.