Worried about the impact your credit will have on your APR rate? You certainly aren’t alone. More than 25% of US consumers have credit scores of 620 or less, and we’re here to help. Many dealerships now have special financing departments that focus on applicants with subprime credit, and we make it easy to get approved. When you apply online, we get you approved by a lender based on where you live, your income, and your credit profile. The application process is quick and painless, and there are no obligations.
Interest Rates for People with Low Credit Scores
There is no getting around the fact that lower FICO scores result in steeper interest rates. Individual interest rates vary widely based on many different factors, including your lender, FICO score, loan type, loan term, and other factors. However, we can give you a range of rates based on our industry experience.
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As we said: expensive. However, there is a lot you can do to reduce the total interest you end up paying. First and foremost, steer clear of a prolonged repayment term like 5 or 6 years. The more time it takes to repay the loan, the more you’ll pay in interest. Second of all, offer a down payment. Not only will this decrease how much you have to borrow, it will help to minimize negative equity.
If you’d like to pay less in total interest, consider the following:
- Opt for 3-4 year financing. The shorter your loan, the less you’ll pay in interest.
- Offer a down payment. A down payment will help reduce the size of your loan, and therefore the amount of interest you pay on it.
- Valid New York drivers license.
- Monthly income of $1500 (pre-tax).
- Employed for at least 12 months.
- Any bankruptcy discharged.
- No repossessions in last year.
What Kind of Vehicle Can I Purchase?
Vehicle restrictions vary from lender to lender, but we can offer a few requirements based on our industry experience.
- Vehicles may be new or used.
- No more than 75,000 miles on vehicle.
- Vehicle no more than 6 years old.
- Minimum loan amount of $7500.
Additionally, you may have to buy your vehicle from a lender-approved dealer.
Down Payments: Do I Need One?
Many dealers and lenders who approve people with bad credit do require a down payment.
They reduce the risk for the loan provider. If the vehicle has to be repossessed, they have a better chance of recouping their losses. For you, the buyer, there are advantages as well. You will pay less in total interest, simply because your loan will be smaller, and you won’t be as susceptible to negative equity, meaning you owe more on your vehicle than you could sell it for.
There are lenders who offer no down payment auto loans for people with bad credit. Unfortunately, it’s common practice for a dealer to simply roll the down payment into the total amount financed. In that way, you might not have to offer any money upfront, but you’ll spend the money in the long run – with interest!
The Impact on Your Credit
Repaying a car loan as agreed is a highly effective means of reestablishing credit. Lenders will start seeing you as a more creditworthy consumer, which means lower loan rates on future lines of credit. Missing or overdue payments, on the other hand, can crush your credit. So you want a monthly payment you can easily afford, not one that leaves little margin for error in your monthly expenses.
We recommend allocating no more than 10% of your income to your monthly payment. By way of example, let’s look at the average numbers for New York residents.
- Monthly Income: $2,650
- Total Vehicle Budget: $477
- Suggested Payment: $265
- Leftover Funds for Fuel, Maintenance, etc: $212
Spending too much could lead to missed payments, delinquency, even default.
Many applicants can get approved for a car loan in NY after bankruptcy. There are certain restrictions depending on which chapter you filed. With Chapter 7, you’ll typically need to have everything discharged. With Chapter 11, you’ll typically need to receive permission to take on a new loan from your case trustee.