Having a credit score of 600 won't necessarily prevent you from getting an auto loan, but it will likely make the loan more expensive. Taking steps to improve your rating before applying for a car loan can put you in the driver's seat and make it easier to negotiate the best possible terms. Whether your credit score is 600 or 800, you'll need to provide your lender with documentation that shows your ability to repay the loan. With a credit score between 600 and 609, you'll be able to apply for non-preferential or quasi-preferential loans at a much higher interest rate than if you could increase your credit score to more than 700. Before applying for an auto loan, it's important to set your budget.
This will help you get approved and set you up for success. Read on to learn more about how your credit ratings affect your chances of getting a car loan and ways you can increase your chances of approval and potentially receive better offers. You may also need to provide other documents that show you are financially stable and can pay off an auto loan. Even if your options are limited, you can still get an auto loan with a high-risk credit score of 600 to 609. If you have bad credit or don't have credit, you could still qualify for a car loan, but you should expect to pay more.
While you can't do much with these more expensive rates until your credit improves, it's crucial that you understand how your interest rate is affecting your auto loan funding. Having a credit score of 600 alerts lenders that you have difficulty repaying the money you borrow, so they are more cautious about lending you money. You may also need to put some money down when buying your car. You'll need to decide if you want to finance through the car dealer, your local bank or credit union, or an online lender. In the table below, you can view the average interest rates for new and used cars by credit rating to see what effect they have.
Your FICO Auto Score, which most lenders use to evaluate auto loan applications, may be lower or higher than your normal credit score, based on your previous car loans—that is, how much you borrowed and how well you made your payments. If the lender has to foreclose on your car, it may be difficult for you to sell it for enough to cover your balance. Yes, an auto loan will improve your credit score if you make payments on time and in full until you change the car, sell it, or cancel the loan. Increasing your credit could allow you to refinance your car loan at a lower interest rate in the future.