What Will My Interest Rate Be On A Car Loan With Bad Credit?
Getting a car loan with bad credit is one of the easier loans to get. The question for many is what will my interest rate be on a car loan with bad credit? Let’s take a look.
From a financial perspective, credit is the means by which we are all judged. The standard is based on a formula issued by Fair, Isaacs that is known as the FICO score. The higher your score, the better your credit. Conversely, the lower your score, the worse your credit is considered.
So, what will your interest rate be on a car loan if you have bad credit? There is no definitive answer. This is because it depends on just how bad your credit is as well as how much money you are willing to put down on the loan. Another factor considered is the length of the loan. The longer it is, the higher the rate in general. Why? Well, the car loan lender is trying to measure the risk of you potentially defaulting. The higher it views that risk level, the more you will pay.
So, what kind of numbers are we talking here? Well, car loan interest rates can range all over the place. The current credit market is not exactly a strong one after the debacle in the housing industry. Still, you can potentially pay between 10 and 20 percent interest rate on a car loan if you have bad credit. It is truly a bargaining situation and you want to shop around to different lending sources. You will get much different rates from each.
A quick word of caution when it comes to evaluating these loans. Some lenders will give you what appears to be a low rate and then nail you in other ways. This can be done through points you pay on the loan or some type of balloon payment that is required at the end of the loan. Also, watch out for teaser rates where a company offers a low rate up front, but it resets in a year or two and runs your interest rate and payment through the roof.
Can you get a car loan with bad credit in this market? Yes, just make sure you understand the interest rate on the loan and all the parameters that will go into the total amount you end up paying.