The amount of credit card debt you carry will affect your overall credit score, which can ultimately reduce your chances of securing a car loan. However, if your debt is manageable compared to your income, your credit will not suffer.
Expert Insight
Your credit score partly depends on the amount of debt you carry. It is wise to have a fair amount of credit available, but it is best to keep your limits low. The comparison of your available credit to actual debt will be used when considering your credit score for an auto loan.
Significance
If you have a bad credit score, you may not qualify for many traditional auto loans. Instead, you may have to seek high-risk alternatives. There is no shortage of lenders willing to extend high-risk loans, but these loans present higher origination fees, higher interest rates and larger penalties if you are late on payments or default.
Alternatives
If you have a high amount of credit card debt, try to wait until you have paid down some of the debt before seeking a car loan. Do not close your credit cards once you have repaid the debt; this can hurt your score in the end. Once your ratio of available credit to actual debt is low, seek a car loan first and shop for a car second. This will help you to assure you can afford the car you are shopping for before you find a vehicle you like.
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