How Your Credit Score Can Affect The Auto Loan You Get

18 May 2017
 Categories: Finance & Money, Blog

No matter what credit score you have, you can most likely qualify for auto loans. You may have to shop around for one, but there are lenders out there that are willing to offer loans to almost anyone, even to people with really low scores. If you want to buy a car and will need a loan to do this, you should find out what your credit score is before you start shopping. Your credit score can affect the loan you get, and here are some of the ways this occurs.

Your Ability To Get A Loan

Getting any type of loan or credit line is much easier if you have great credit. Great credit reveals a person's creditworthiness, and lenders love issuing loans to people that have proven themselves worthy. On the other hand, lenders can be skeptical when issuing loans to people with bad credit, and most lenders do not look into why a person's credit is bad. They just simply assume a person has bad credit because he or she does not repay bills on time or in full. Because of this difference, it may be harder for you to find a lender that will approve a loan for you if your credit score is low.

The Interest Rate On Your Loan

When you find a lender that will approve your loan, your credit score will determine what interest rate you must pay. There are other factors that can also affect your interest rate, but your credit score is the most important factor. To qualify for the best, or lowest, interest rate on a car loan, your credit score will need to be 781 or higher. If your score is 500 or less, your interest rate will probably be really high, and you might have trouble finding a lender who will give you a loan.

The Amount Needed For A Down Payment

Your credit score might also affect the amount of money you will need to put on the car as a down payment. With a high credit score, the lender may not even require a down payment. With a low score, you may need to put a certain percentage down when buying a car.

Getting a car loan is the most common way people buy cars today. If you need a loan, start by checking your credit and then apply for a car loan with an auto financing company today.