There are several lending institutions that offer auto loans to people that fall in a low income or bad credit bracket. All banks and lending institutions will look up your credit score before offering you an auto loan quote. Customers that have a FICO score of less than 640 are put into a subprime category. While this is not bad, there will be a lot of paperwork involved when obtaining the loan and most customers will be given an interest rate that's much higher than the rate offered to those belonging to the prime category. If you're stuck with bad credit and wish to purchase a car, you don't have to settle for a vehicle that doesn't match your requirements. With a little research and a few guidelines, you will be able to obtain an auto loan with good financing rates.
Find out if you qualify for an auto loan >>
CarsDirect helps more credit-challenged customers find car loans than any other website in the country. The company works with a network of dealers who specialize in car loan financing. The dealer has access to a number of financial institutions and will shop around to find you the best deal. Just fill out a simple application and you will be on your way to receiving a car loan.
Do I Need a Cosigner for an Auto Loan if my Credit Score is Below 640?
No, you do not necessarily need a cosigner auto loan if you have a low credit score. While not always required, having a cosigner that has an excellent credit score might result in a better interest rate on your loan. A credit score below 640 is considered sub-prime, which means you will pay a much higher interest rate than a prime loan. The bank or finance company may require a larger down payment if your credit rating is sub-prime as well. When looking for a sub-prime loan, search around and be sure to read all of the loan terms and conditions, and ask questions about anything you don't understand.
Will a Bigger Down Payment Give me a Lower Interest Rate?
In the majority of cases, a bigger down payment will have some affect on your interest rate. The biggest factor that affects an interest rate is your credit rating. If you have an excellent credit score, you will be offered the lowest interest rate available. On the other hand, if you have a credit score that is lower than 640, you will be considered sub-prime. Sub-prime candidates will be offered a higher interest rate on their loan. Having a 20% down payment can often bring down the interest rate. In addition, having a co-signer with an excellent credit score will often help you get a lower rate.
What is a Subprime Auto Loan?
A subprime auto loan is simply an auto loan that is made to a person with a less than stellar credit rating. Usually the credit score threshold is around 640. Anything below that is considered sub-prime. A sub-prime loan will often require a bigger down payment and will carry a higher interest rate when compared to a prime loan. If you can find a co-signer with a good credit rating, you may be able to qualify for a better interest rate and a lower down payment. It is a good idea to examine your credit report before applying for a loan. Look for any information that is incorrect. Mistakes on your report can lower your score.
