Are you looking for a car loan but your credit score is 640? A FICO credit score of 640 falls in the average range and you can definitely get a car loan with that score but you will have to pay a higher interest rate (APR) than someone with let’s say a 680 credit score, keep in mind that lenders do not only look at the credit score when deciding who to give a car loan to. Your current income and debt to income ratio play a huge part of the decision.
A credit score of 640 is going to most likely require a down payment of 10 percent in cash or trade. If you can put down 15-20 percent down then that’s even better as it will definitely lower you interest rate and you will end up paying less over the course of your loan term. I know somebody who had a credit score of 530 and was able to get a new Honda Civic through financing with a 11.99% APR rate, while 11.99% interest is not great it is definitely very good for someone with a 530 credit score.
It is always better to go to the dealership already pre-approved for an auto loan, you can get an auto loan through a credit union,banks,etc. Capitol One has a good auto loan service but be prepared to pay over 10% in interest with a 640 credit score. CarsDirect.com is also a great auto loan service since they work directly with dealerships in order to get you an auto loan. CarsDirect helps customers with not so good credit scores and will help you find car loans easily as they are probably the best website at working out loans for you by directly working with dealerships while you just wait until they contact you with an offer. The company works with a network of dealers who specialize in car loan financing. The dealer has access to a number of financial institutions and will shop around to find you the best deal. Just fill out a simple application and you will be on your way to receiving a car loan.
Do I Need a Cosigner for an Auto Loan if my Credit Score is Below 640?
You do not need a cosigner auto loan if you have a low credit score. While not always required, having a cosigner that has an excellent credit score might result in a better interest rate on your loan. A credit score below 640 is considered sub-prime, which means you will pay a much higher interest rate than a prime loan. The bank or finance company may require a larger down payment if your credit rating is sub-prime as well. When looking for a sub-prime loan, search around and be sure to read all of the loan terms and conditions, and ask questions about anything you don’t understand.
Will a Bigger Down Payment Give me a Lower Interest Rate?
In the majority of cases, a bigger down payment will have some affect on your interest rate. The biggest factor that affects an interest rate is your credit rating. If you have an excellent credit score, you will be offered the lowest interest rate available. On the other hand, if you have a credit score that is lower than 640, you will be considered sub-prime. Sub-prime candidates will be offered a higher interest rate on their loan. Having a 20% down payment can often bring down the interest rate. In addition, having a co-signer with an excellent credit score will often help you get a lower rate.
What is a Subprime Auto Loan?
A subprime auto loan is simply an auto loan that is made to a person with a less than stellar credit rating. Usually the credit score threshold is around 640. Anything below that is considered sub-prime. A sub-prime loan will often require a bigger down payment and will carry a higher interest rate when compared to a prime loan. If you can find a co-signer with a good credit rating, you may be able to qualify for a better interest rate and a lower down payment. It is a good idea to examine your credit report before applying for a loan. Look for any information that is incorrect. Mistakes on your report can lower your score.
Remember to shop around to see where you can get the best interest rate percentage. If you do all your car loans inquiry within a month then it will only count as 1 Hard Inquiry on your credit score so make sure to start applying for car loans when you are ready to buy a car and can do all the applications within a one month period. Go fill out some applications, preferably with a bank or credit union whom you already have a good relationship with and good luck on your car search!