Getting an auto loan with bad credit can end up costing you thousands of dollars more than it would have with good credit.
We’re here to educate you on how credit impacts your rate on an auto loan so you don’t have to pay the price of having bad credit.
Today’s average price of a new car is over $30,000. Unless you’ve got that type of cash sitting in your savings, chances are that you’ll have to take out a loan.
Let’s assume that you need to take out an auto loan of $25,000 to afford that new car, and that you’ve got an excellent credit score of 730. Since you’ve got the best credit, your auto dealer gives you their best rate of 5.30% and your monthly payment over 36 months is $753 a month. You make a clean exit off the lot in a new car with the best rate at the most affordable price.
Now, let’s assume you had a late payment last year and your credit score took a drop to 680 (which is very reasonable to assume, given that a single late payment can drop a credit score by 30 to 100 points!). What happens when you go to the auto dealer with a moderate credit score, instead of an excellent credit score?
If your score is between 675-699, the interest rate on your auto loan for 36 months that is fixed for the life of the loan could be around 8.78% – a full 3% more than you would have if you didn’t have that late payment reporting on your credit report.
How much does an extra 3% in interest cost you over the life of the loan, and how much extra will you pay for the same car?
Your monthly payment at 8.78% would be $792 a month, adding an extra $1,404 to the cost of your car.
If your late payment really took a hit on your credit and dropped your score by 90 points from 730 to a 640, your interest rate would be around 12.36% with a monthly payment of $835 – adding an extra $2,952 to the cost of your car.
This is when it makes sense to call Go Clean Credit for assistance in getting that late payment removed from your credit report. Instead of paying an extra $2,952 over three years, you can enroll in one of our credit repair programs for as little as $99 a month, get your credit restored, and make a clean exit off that car lot with the best deal possible.
(View our customer testimonials to learn how we have raised thousands of customers credit scores since 2003.)
If you have bad credit – generally defined as a credit score in the 500’s – it may possible to qualify for an auto loan, but the interest rate could be as high as 25%. Bad credit can really take a toll on a person’s life, and qualifying for a loan to drive a safe, reliable car is one of the negative side effects.
Even if you’re fortunate enough to be able to purchase a car with bad credit, you’re still being punished in some way for your low credit score. Usually, the penalty you’ll receive for bad credit is a higher interest rate than you would have received normally.
In the case of our example, if you had a credit score of 560, your interest rate would be around 18.20% for a monthly payment of $906. That would mean you would pay $5,508 more for the same car as the person with a credit score of 730!
Bad credit auto loans end up costing you thousands of dollars more than it would have with good credit. Higher interest rates are always given to people with bad credit, but Go Clean Credit doesn’t want you to be punished anymore. Ask us how you can get a free consultation and learn what we can do to get you lower interest rates on your car loan today!