Even though getting a car loan or car refinance with bad credit is tough, but some money lenders can agree to provide you with one. However, getting the right loan provider is the key as the rate of interest for car loan varies from lender to lender. While some have low rate of interest, there are others whose rates are sky-high. This rate depends on the duration of the loan, condition and mileage of the vehicle and the state you reside. The rate of interest determines the amount of monthly payments and when you have a bad credit score, you have to pay more. You cannot deny it as the rates will be higher for a bad credit score than that of a good credit score.
The rate of interest for new car is different than that of the used car. Based on the credit score, there are various categories of rates:
Super Prime – If you have a credit score between 781 and 850, you have to pay an interest of 3.23% for new car and 3.95% for a used vehicle.
Prime – You fall in this category when you have a credit score of 661-780. In this case, you are required to pay an interest rate of 4.16% for new vehicle and that of used car will be 5.68%.
Non prime – When your credit score falls between 601 and 660, you are eligible to non-prime category. In this category, the new car interest rate is 7.05% while the used car interest rate is 10.44% which is quite high.
Subprime – A person having a credit score between 501 and 600 appears in this category. He or she has to pay the interest at the rate of 11.35% if they buy a new vehicle. But if they buy a used car, this rate will go to 16. 92%.
Deep prime – This category is for those who have really awful credit score. The people who have credit score of 300-500, come under this category. In this case, they have to pay an interest rate of 14.07% for the new automobile; while for a used one, they have to pay 19.81% interest rate.
So, now you saw how a bad credit score affects your loan, amount of loan and interest rate. But don’t worry; you can still get the car loan with bad credit if you follow a few tips.
- You have to be aware of your credit score before applying for the loan. This way you will know which category you are in and how much you have to pay.
- Try to make your credit score better. You can do this by paying off the monthly installments at the regular interval.
- Go for that vehicle that is within your budget or you can pay off the loan easily. Going for an expensive will aggravate the situation.
- If possible, make a down payment bat the time of buying the car so that your loan amount and interest are reduced.