Average Rates Depend On Credit Score
In general, credit scores range from 300 to 850. A good score, approximately 670 or above, would boost the lender’s trust in you. Having a reliable credit history helps qualify you for reduced interest rates also. A fair score is between 580 to 669. This score allows you to get mediocre rates. A bad credit score, approximately below 580, makes it more difficult for the lender to grant you auto loans. Even if a lender approves your application, it’ll offer the loans in such cases at high-interest rates.
Factors To Consider Before Applying
Before you apply for a loan, make sure to take into account the following things:
- The rate of interest given to you relies on your credit score, credit length, income, and the vehicle
- If you already hold a loan and are making consistent payments, it’ll improve your score and make you more eligible for a refinance
- Many lenders offer repayment terms of almost 84 months. However, it’s recommended that you opt for shorter terms
- It’s prudent to pay off the car loan at the earliest since the cars devalue rapidly, thus increasing your chances of going upside down on the loan. Owing more on the loan than the car’s worth is an unsafe monetary situation and can lead to many problems
- Many lenders offer a pre-approval which entails a soft pull on your credit report. This doesn’t have any effect on your score, nor does it guarantee final approval. Other lenders run hard credit checks that incidentally decrease your score by a few points. Make sure to check with the lender before authorizing them to pull your credit history
- In every case, a hard pull is necessary before finalization of the loan
- Applying with several moneylenders helps in getting a competitive interest rate
- Many lenders work with a particular dealership network and abstain from loaning money to purchase cars from private dealers
Top 3 Lenders
There’s no shortage in the number of lenders who offer new auto loans, used-car loans, and auto loan refinancing services. Here are some leading lenders that you should consider:
Carvana Financing
The average rates offered by Carvana range from 3.90% to 27.90%.
Pros:
- Guaranteed full-year transparency
- Competitive price ranges
- Charge-free return policy
- Multiple financing options
- Good for poor credit score holders
Cons:
- Quality concerns at the time of return
- Customer support isn’t up to the mark
Consumer Credit Union
The Consumer Credit Union offers auto loans with an average interest rate, ranging from 2.99% to 21.99%.
Pros:
- Offers competitive market rates
- Zero prepayment penalties
- Best for both new and used cars
- Longer repayment periods
Cons:
- High-interest rates for cars older than eight years
- Customer service could be better
Capital One
Capital One helps with auto loans, with an average interest rate of 3.39% and 4.07% to 24.99%.
Pros:
- A simple and quick application process
- Numerous options for various credit profiles
- Convenient tools and resources
Cons:
- Limited car models for private-party loans
- Serves limited locations
Ways To Increase Your Credit Score
You can easily get approved for an auto loan with a fair credit score. If you can increase your score, you’ll be able to acquire exclusive deals that are only available to borrowers with superior scores. Listed below are some ways to increase your score:
- Make sure to make the payment of your essential bills, utilities, rent, and phone bills on time as delaying the payment would harm your credit
- Get credit points by making cell phone bill payments and other utility payments on time
- Try to pay off any debts and keep credit card balances low
- Avoid unnecessary credits or accounts. Extra accounts will affect the score in various negative ways and reduce any chance for improvement
- Keep credit cards that aren’t in use open. This will increase the credit utilization ratio
- Avoid applying for new and increased credits since it affects your score negatively. This is due to the various hard inquiries
- Review your credit report with the three credit reporting bureaus. This will help you avoid any inaccuracies
- If you're getting any errors in your credit report, dispute the information and have it corrected
Bottom Line
It’s always a good idea to review your credit score before applying for a loan. If you have a fair score, you can easily get a good deal. However, improving your score will help you get better deals.
