At present, the average credit score for Americans is 670. However, this score is neither a bad credit score nor an excellent credit score. Lenders will always have a range of credit scores they find acceptable for the different loans and financing offers they provide. The credit score to get a car loan does not have to be high, however, it will still affect the financing and loan options for the car.
Traditional lenders will always require fair or good credit score to get a car loan. The credit score for what they consider to be acceptable credit is between 620 and 700. As always, the credit score will also determine the down payment, the interest rate, the requirement of a cosigner, or the length of the maturation period. Generally, the better the credit score of the borrower, the more attractive these options become.
If the borrower does not meet the credit score needed for a car loan from the traditional lenders, he can choose to borrow from alternative lenders instead. These lenders are smaller than traditional lenders and are generally newer and do not usually have a well established name. For these reasons, their required credit score to get a car loan is normally low.
These alternative lenders are easy to find. Among them are car dealers or manufacturers, online loan lenders, and special lenders that cater to high risk borrowers.
Of these alternative lenders, the financing agencies of car dealers or manufacturers offer the best rates. Several examples of trusted manufacturers are: General Motors Acceptance Corporation, Ford Motor Credit Company, and Nissan Motors Acceptance Corporation. The main goal of these financing agencies is to make sales. Therefore they offer lower interest rates to entice buyers. Unfortunately, the present situation in the economy has forced them to require a 620 credit score needed for a car loan.
Small lenders, especially high risk ones, will normally offer car loans for people with bad credit. However, they charge large down payments or even interest rates in return. These lenders also give large penalties for late or delayed payments.
There are even lenders that accept a 500 credit score to get a car loan. An important thing to remember about these lenders is that they have interest rates that are close to the maximum, if not the maximum, allowed by the state. This means that although the car loan will be accepted, the borrower will have a difficult time paying off the loan.
Having a credit score of above 700 will give the most attractive rates for the borrower. With these scores, the lender will usually offer interest rates that are more or less 3% yearly. This is significantly smaller compared to the 19% maximum interest rate for bad credit car loans.
The credit score to get a car loan does not need to be high if a borrower wishes to get one, however, he must always evaluate whether he does have the capability to pay off the higher interest rates.
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