Are you thinking of buying a new or used car, truck or SUV? If so, you may be checking out vehicle prices online in order to determine exactly what you can afford. And while you’re doing this, don’t forget to factor in a realistic estimate of what your interest rate might be. This rate will be largely determined by your credit score, so you will want to find out just how well or how poorly your credit is rated.
Are You a Safe Bet or a High Risk?
Potential lenders probably don’t know you personally, so your credit history is the only tool they have to measure what kind of borrower you will be.
- Lower Scores: If you have indications of poor borrowing habits such as bankruptcy, repossession, charge-offs and late payments showing up in your history, your credit score will be lower. This tells lenders that extending credit to you may be risky because there is a chance that you won’t make good on your promise to pay.
- Higher Scores: If your credit history shows that you have never applied for more credit than your income can handle, and have always paid your bills on time, your high score will reflect that behavior. And what this reveals to lenders is that you are a good loan candidate.
How Credit Scores Affect Loan Rates
Keeping in mind that there are exceptions and that ultimate decisions are in the hands of lenders, there is a basic scale to determine which interest rates are extended to particular kinds of buyers.
- Good to Excellent Credit: If your credit score is in the 700 to 850 range, you are a candidate to receive the prime rate (or close to it) on your auto loan. The current WSJ prime rate is determined by a survey (conducted by the Wall Street Journal) of the 30 largest banks. It is the average interest rate that is being offered to the most desirable loan candidates. Right now, you should get a 3.25% rate with excellent credit and around 4% with good credit.
- Fair (or Average) Credit: If your credit score is somewhere between 699 and 620, your interest rates will be little higher than those offered to buyers with good to excellent credit. On average, you should expect to pay between 5% and 6% in interest on your car loan.
- Bad (or Subprime) Credit: Scores that fall under 620 are generally thought of as indicators of “bad” credit. A higher bad score may get you an interest rate in the 7% to 12% range, while a score that is lower than 500 may make you subject to 15%+ interest rates. If you are a bad credit buyer, you may want to consider either improving your credit score before buying a car, or seeking out a dealer who specializes in bad credit auto loans.
The Best for Bad Credit
If you know that your credit is significantly damaged, and you are looking for the best deals on bad credit auto loans, Suburban Auto Finance can help. The dealers in our network have relationships with lenders who are able to give you the best rates possible for your situation. Just fill out our fast and secure application to get started today.