Loan Deposits

Getting a loan with bad credit isn’t impossible, but there are some things you should know about bad credit auto loans before you apply.  After all, knowledge is power!

The average car loan interest rate for someone with ideal credit is somewhere between 6 and 8%. With subpar credit you will probably end up paying closer to between 14 and 20% interest which really depends on the lender. This will obviously translate to much higher payments each month. However, having a current car loan on your credit report will gradually improve your score.  After you’ve been making payments on time for a little while, you may be eligible for auto loan refinancing, which many people use to get lower interest rates and monthly payments.

While a borrower with great credit will most likely be able to finance a car over a period up to six years, if you have shoddy credit, you will not be able to get financing for that long of a period of time.  The longest loan you will probably be able to get is three years, or 36 months.  Since your car purchase will be financed for a shorter period, you will get higher monthly payments- so you may be better off finding a cheaper vehicle for your bad credit auto loans, and as your credit improves, you can look for a better car.