Despite the fact that the economy is slowly recovering from the recent recession that was brought about by bad credit decisions, the credit requirements for most loans still remain tight. This means it will be very difficult to find car loans, let alone those with favorable interest rates if your credit score is below average. Therefore it is important to consider the minimum credit score for an auto loan before pushing through with the loan.
The credit score needed for an auto loan varies with each lender. However, a credit score in the range of 500 to 579 is generally considered bad credit because 500 is the average minimum credit score for an auto loan. It will be extremely difficult to find a bank, or a credit or financing company willing to lend you money for the loan. In rare cases, a car loan may be approved but it will surely be beyond favorable rates, often times even reaching the maximum interest rate legally allowed in the state.
It is highly discouraged to push through with the loan if you have the minimum credit score for an auto loan. Due to the very high amount a borrower will have to pay when choosing to push through with a car loan, it is advisable to choose a second hand car instead to save on interest payments. This will result to lower monthly payments which at first may seem insignificant but will really be a lot cheaper in the long run. Even still, a better choice will be to give up on planning for the car loan altogether until your score goes well beyond the credit score needed for an auto loan.
Meanwhile, having a credit score in the range of 580 to 619 will be considered minimal but fairly acceptable. It will be very unlikely that you will find a lender who can offer you a traditional loan with acceptable rates. In fact, just like having the minimum credit score for a car loan, there will still be a huge probability that the interest rates will be the maximum allowed by the state.
A borrower with a credit score above 620 will not have to worry about finding lenders who are willing to offer traditional loans with acceptable interest rates. Although the interest rate is still high compared to interest rates for credit scores above 700, this credit score is still the recommended credit score for people looking for car loans fast.
As a general rule, it should be remembered that a bad credit score will guarantee higher interest rates. This is true if your score is the minimum credit score for an auto loan. Likewise, choosing a longer payable period will result in a higher total payment. For optimum savings, it is recommended to postpone the car loan until your credit score reaches 620 and choosing a shorter paying period.