When looking for a car loan, your credit score will play the biggest role in determining whether you are eligible to be approved. Other factors such as employment experience and history as well as the length of time you have been staying in you residence are also part of the equation, however, the credit score for a car loan will always be the most important factor.
Like all other types of loans, having the minimum credit score for a car loan will get you the highest interest rates while having the maximum credit score of 850, which means you have a perfect credit rating, will get you the best loan with the lowest interest rate.
At present, the average minimum credit score for a car loan for most banks and credit and financing companies is valued at 500. Looking for a car loan while having a credit score within this range will be difficult but possible. In the case that you do get approved, you will be bound to pay the highest interest rates allowed for your state. It is wise to forego with the loan until your credit score improves.
To help with the analysis of the credit score car loan, the following credit scores and calculated interest rates are computed based on the current national average.
Having a credit score of 500 to 589 with a loan of about $10,000.00 will get you an annual percentage rate of 19.228% or a monthly payment of about $368.00 for a 36 month period. For a 60 month period, the monthly payment rate will be about $261.00. Because this credit score is considered a bad credit score when applying for car loans, the interest rate will most likely be the maximum allowed in the state. For a car loan of $10,000.00, you will be paying a total of $13,248.00 if you wish to pay off the loan in 36 months. Likewise, choosing to pay in 60 months will amount to $16,704.00.
Understandably, having a more preferable credit score for a car loan compared to the range mentioned will give you more preferable interest rates. However, as always, the longer payable period will mean a higher payment in the long run. As an example, let us consider a more favorable credit score car loan.
Having a credit score of about 660 to 689 is considered a favorable credit score for car loans. This will yield a traditional car loan with average interest rates. For a car loan of $10,000.00 and a credit score in this range will give you an annual percentage rate of 8.843% or a monthly payment of about $317.00 for a 36 month period or $207.00 for a 60 month period. The 36 month period will total $11,412.00 while the 60 month period will total $12,420.00.
Before pushing through with the car loan, make sure you call a few auto loan lenders and ask about the interest rate you wish to have and its corresponding credit score for a car loan. Knowing your credit score together with this will help you evaluate whether your loan will be approved and how much the interest will be.