Average Interest Rate for Car Loans With Bad Credit
Your credit plays an essential role in every part while applying for a loan, but it has a huge impact on the interest rate. If your credit score is bad, you’d have to pay more on your loan.
How bad credit score can take a dig at the rate of interest?
Interest is something that the lenders take from customers for taking the amount from them. It is known as the rate of percentage and depends upon your credit score since this is the thing from which the trustworthiness of a borrower can be seen.
People who have good credit point have the best past record of paying on time and this is why they are charged less. On the other hand, people with a low credit score are the borrowers on risk and this is why they are charged more.
The average rate of interest by credit score:
As per the data from FICO, the normal rate of interest with the best credit score higher than 790, is around 4.6%. For the people with a low credit score which is below 650, the rates increase substantially.
1. 710 and above – 4.52%
2. 680-720 – 5.86%
3. 659-690 – 8.15%
4. 620-660 – 11.25%
5. 591 and below – 15.95%
6. 500-589 – 17.13%
How does a term of the loan affect the rate of interest?
The longer term you opt for, your rate of interest will get higher. The car loan payment options can start from 24 to 84 months and these days people opt for a longer loan period. Most of the people take advantage of the long term because the less monthly payment is appealing but you’ll pay more in months because the interest rate will keep on adding.
Do interest rates differ for used as well as new vehicles?
Yes, most of the times they are higher for the loans taken for a used car because the used vehicles are not much reliable than the new model and have less value of resale.
As per the data from FICO, the rate of interest for used for someone with good credit for the 48-month plan is 5.26% while it is 18.28% for the one with bad credit.
Do different lenders offer different rate of interest?
Genuinely speaking, lenders and dealerships offer less interest in rates on a car loan as compared to banks. This happens because the dealerships come up with fewer rules and are more interested to meet the need of a customer and offer a loan.
How to get the best rate of interest on a low credit car deal?
What amount you pay as interest entirely depend upon the credit score. The normal interest rate of a person with a good credit score is 4.6% but the borrowers with bad rates have access to the rate of interest that is higher.
If your credit score is bad or low, it is better to apply for the car loan with a shorter period and get your car financed from the dealer to get the best rate of interest.