Auto loans are among the easiest loans to qualify for, even for people with bad credit. And even if you have bad credit, if you have a high enough income you are likely to qualify for a number of higher interest rate auto loans. That said, even high-risk auto lenders will not extend loans to borrowers whose credit is below certain limits.
Checking Your Credit Report
Before applying for a loan, check your credit report so you know exactly where you stand. Federal law allows you to order your own credit report once per year for no charge. Knowing your credit score is important so you have a general idea of what you will qualify for and the interest rate you should expect to pay.
Low Credit Score
The lower credit your credit score, the greater risk you pose to lenders and the higher the interest rate you will be charged. In late 2010 well-qualified buyers could get auto loans at less than 6 percent interest, but those with poor credit might pay up to interest rates of 15 percent or higher.
Credit Score
While there is no "magic number" for a credit score, many experts say that a credit score over 720 will qualify most borrowers for the best interest rates. And the consensus is that anything below 600 will probably mean you can only get a high-risk loan with much higher rates. It will be difficult to qualify for any kind of loan with a score of 550 or below.
Income Is a Big Factor
Income is also a big factor in the lender's decision. This is particularly true if you have poor credit. Most people with poor credit but a high, steady income will qualify for a loan.
Qualify for the Loan First
If you have poor credit, apply for a loan before you begin car shopping so you know how much car you can afford. Also keep in mind that banks have different policies, so it is possible that one lender will approve you while another turns you down. Or one lender may offer more favorable loan terms than another.
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