How To Get A Low Credit Auto Loan

key-791390_640Unless you’ve got money to burn, chances are, you’re going to need an auto loan to purchase your next car (only about one in ten people have enough cash on hand to buy a car outright).

Most of us already know the usual routine: apply for a loan to your bank, get approved for the amount you need to buy your vehicle of choice, head to the dealership, negotiate, etc.

This process is all fine and good if you’ve got sterling credit, but what if you don’t? Common wisdom dictates that without great credit, your chances of getting anything done are slim to none.

Thankfully, this isn’t necessarily the case, as we’re going to explore how you might go about obtaining low credit score auto loans to help out when your financial situation is a bit less than perfect.

What’s The Deal With The Credit Score?

Here are a few basics you should keep in mind. You might already know that your credit score is that ever-important three digit number that ranks your creditworthiness. The lowest you can go on the FICO is 300; the highest credit score is 850.

Where you fall is based on an evaluation that comes from the three major consumer credit reporting agencies: Trans Union, Experian, and Equifax. The financial decisions you’ve made in life all factor into how these agencies rate you, and the better they view you, the higher your score.

The credit score you’ll need to secure the best rates on most normal auto loans will vary from lender to lender. In many cases, you’ll need a score above 600 to even consider getting most conventional loans.

While this might seem out of reach if your credit score is low, there are still ways to go about obtaining a loan even when your credit is damaged.

The Plan When Your Credit Score Is Low

The first thing to remember is that there are degrees to “low credit,” and the term is highly subjective. Just because your score is low, that doesn’t automatically mean that every lender will turn you away.

There are still plenty of lenders around who will see you as a worthwhile prospect and are willing to extend you the terms that are reasonable; you just have to be prepared to shop around.

So-called “sub-prime” loans are still largely available to individuals with a less-than-stellar credit score, and while the interest rates tend to be higher (10-13% as opposed to 3-5%), if you take your time to evaluate all the options, you’re more likely to find a loan on the lower end of the interest rate scale.

Coincidentally, you might not even need to take a sub-prime loan, even if your score is “low.” Because it’s easier for your lender to repossess your car than your house or some other kind of property, there’s a higher likelihood that a score that would put you in the sub-prime home loan category is actually a near-prime auto loan score.

Arm yourself with knowledge. If you feel your score might be low, why not check it first? There are numerous outlets that will allow you to obtain a free copy of your credit report. Make use of these so you can check before you start fretting about a low score.

Make sure that you remember that your credit score isn’t fixed. There are ways to build it up. Even if you have to take a low credit auto loan now, by staying on the straight and narrow, you can use that loan to start getting your credit in better shape and better preparing yourself for next time.

The Bottom Line

Yes, your credit score might leave something to be desired in its current state, but that won’t automatically disqualify you from getting a new car. Check your options (and your score) and use all the tools available to you to get ahead of the curve.


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