Have you got a credit score in the 550 range? Perhaps you’ve struggled with a bankruptcy or loan default, which did a number on your credit? The good news is, you can indeed finance a car with a 550 credit score. However, there may be a few conditions imposed on the loan that you will not like.
How and Where to Get Approved
With a credit score in the 550 neighborhood, you will not be approved by large banks or credit unions. Typically, these institutions have minimum credit score thresholds for approval. Anyone with a credit below the threshold is declined, and typically a score of 550 falls below the mark.
That will set you to looking for a subprime finance company or dealer that works with bad credit. This is where we can help. When you apply through us, we will place your application in the hands of a dealer or lender willing to approve your credit. Approval is not guaranteed, but our experience and technology give you a great shot at credit acceptance–much better than you’d get in person, picking dealers from the street or phone book.
What to Expect in Terms of APR, etc
A loan through either type of company is better than a buy-here-pay-here lot–your other option–but will come with a few hard to swallow conditions. Those conditions include:
- Down payment…with a low credit score, you will be required to offer a down payment. How much will depend on your credit score itself. There is a transverse relationship between the two, the lower your score, the higher your down payment. At 550 you will most likely be looking at roughly twenty percent of the total purchase price.
- Interest rate…here comes the boom! You are going to pay at least 10 interest points over prime for a bad credit auto loan. Currently, that would be around 14 percent. Each state has a limit on the amount of interest that you can be asked to pay for a car loan. In general, the highest rate allowable is 25 percent, but that rate is usually reserved for credit scores under 500.
- Repayment…it would be nice to have four or five years to repay your car loan, but you will not be offered those terms with a credit score of 550. In most cases bad credit auto loan companies allow 36 months or less to repay the used car loans that they offer. It can be different if you buy a new car, but not by much.
You may be offered better terms if you raise your credit score. It is fairly easy to boost your credit score into the 600 range, where you’ll be offered a better interest rate and better terms. However, it can be time consuming. Here are a few tips on how to boost that frustrating three digit number.