subject: Prior to applying online for a car loan people ask [print this page] Prior to applying online for a car loan people ask
Prior to applying online for a car loan people often ask can I get a car loan with bad credit? And to estimate the amount they'll be able to borrow. The three major factors used to help determine a car loan interest rate; the finance term, payment and your credit score and income, and the mileage of the used car you want to buy.
For this you can use a specific example along with other information so you can estimate a bad credit used car loan based on your individual circumstances. In our example you will use a FICO credit score of 550, a low monthly income of $1,500 per month, and a used car with 80,000 miles. Keep in mind that this is an estimate, you may be able to qualify for more or less based your job stability, money down, and debt ratio.
Your credit score has a direct impact on the car interest rate when you apply for car loan with bad credit. It's no secret that high credit scores help people qualify for lower interest rates on car loans. If you have a low credit score, how high can the interest rate get? Most states have limits on interest rates. To find the interest rate cap in your state Google or Bing the word Usury Laws.
So if a person with a good credit score above 700 qualifies for a 6% interest rate, and a person with a bad credit score under 500 qualifies for a 25% rate, what rate would you qualify for based on your FICO score?
Most lenders limit car loans based off of your income. Car loan financing companies that lend money to people with good credit have more conservative PTI ratios than lenders for people with bad credit.
Generally speaking if you have good credit and want to qualify for the best rates and terms I would recommend that your car loan payment be under 15% of your gross monthly income. On the other hand most bad credit car loan lenders limit your monthly payment at 20% of your gross monthly income. so in cases like this you should be in good shape.
