Yes, you can get a car loan with a 540 credit score. It isn’t as easy to getting approved with a score of 700 or higher, certainly, but it is possible. There are a few conditions that you need to be aware of before borrowing the money, though.
How to Get a Car Loan With a 540 Credit Score
Large traditional lenders will often avoid offering car loans to people who have a credit score that is less than 680. While credit unions have looser lending guidelines, they still avoid giving car loans to credit scores under 620. So, what options do you have other than buy-here-pay-here (BHPH) dealers, notorious for various abuses? You have us. We work with hundreds of dealers and lenders across the country that work with credit scores in the 500s. These borrowers are typically referred to in the industry as subprime or nonprime.
Each of these lenders is aware that things can go wrong and that individuals face challenges in life. That is why these lenders look beyond the past to see what is currently happening in your financial life. They look for recent on-time payments instead of what happened last year, giving you a chance to rebuild your credit. When you apply through us, we use our advanced technology to place your application with a capable finance specialist, experienced in helping consumers such as you get behind the wheel.
What to Expect: Interest Rates and Terms
As with traditional lenders, you will need to: have proof of income, provide address verification, a valid driver’s license, and proof of full coverage insurance on the vehicle. All of these items protect the lender as well as you.
You will need to be prepared for several aspects of subprime auto loans.
- The first is that the interest rate is going to be higher than it would be if you had a better credit rating. With a credit score of 540, you will most likely be asked to pay between 15 and 18 percent interest.
- Next, the loan term is going to be shorter than you may like. Most specialty/subprime lenders require a repayment period of not longer than 36 months for used cars. New cars could qualify for a longer term, but usually no more than 48 months.
- Lastly, with a score of 540, you will need at least ten percent of the total purchase price of your new vehicle as a down payment. This may be in cash or a combination of cash and trade.
On the brighter side, all of these loans will be reported to the three major credit reporting agencies, so your score will improve if you make all of your payments on time.