Buying a new car is quite an uphill task in today’s economy! A salaried person or a business owner of a small-scale enterprise has to spend years saving money and buying an affordable car.
Nonetheless, car loans make it a little easier. Now you can get a car loan and buy your favorite vehicle easily!
However, it’s not as easy as it sounds. Rather, you need to be eligible for the loan and be able to appear trustworthy in front of the lender.
The lender you seek will look at your credit score to determine your eligibility. If that’s impressive, only then will you be able to get the much-needed loan!
What Is A Credit Score?
There are various types of credit scores. Each one has different criteria and manner of calculation. At the same time, lenders also have their requirements to determine your score.
The basic information that they use on the scoring models is the same. However, they will weigh different factors while creating your credit reports.
The higher you score, the more credible you will be in a lender’s eyes. Hence, you must have an impressive credit score to buy a car using an auto loan. It will make the whole car buying process extremely smooth and easy! The car finance calculator is the most authentic way to evaluate your financial standing.
Credit Scores Used By The Auto Lenders
When it comes to auto loans, there are two most commonly used credit scores. They are FICO and VantageScore. For FICO, you need to score 300 to 850 points, while for VantageScore, you need it to range from 500 to 990. If you fall within these ranges, it will be easier for you to get a car loan.
The Minimum Score Required To Buy A Car
To buy a car, you need a score that would make you a credible borrower. That’s called the minimum credit score. When lenders review the loan application, they look at the income and credit score.
These lenders then assign various categories to the applicants based on their scores.
- Super prime
- Deep subprime
The categories are the same for all the lenders. However, the credit score they associate with each category may be different. Getting a car loan is a smooth process for the super prime and prime borrowers.
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However, anyone who falls below these categories in the credit ranking may have a difficult time, and the application may get rejected. Compare car loans for free and choose the lender with the least amount of strictness in terms of requirements.
To get your hands on a used car, you may need a credit score of 669. However, if you are looking forward to having a brand new car, you need to have a score of around 736. Anything lower than that will make you ineligible to get the vehicle you have been eying for so long!
Benefits Of A High Credit Score
If you are new to it, you may not realize the benefits of a high credit score. Although a minimum score makes you eligible for a car loan, a higher score will ensure you don’t have to pay high-interest rates.
Simply put, the higher your credit score, the lower the interest rate you need to pay against the loan. This way, you can save a lot of money while buying the car.
What To Do If You Don’t Reach The Minimum Score?
Well, there are times when people cannot reach even the minimum credit score when applying for an auto loan. But, if you are one of them, don’t get discouraged. There still are many things that will aid you in this regard.
If you have the budget for it, offer a significant amount as a down payment. It will enhance your credibility as a loan seeker and help you buy the car easily. The bigger chunk of down payment helps you offset a low credit score. It allows the creditor to minimize the risk associated with offering you the loan.
In case you haven’t been able to reach the minimum credit score and still want a car loan, you need to take advantage of a healthy financial life. All the documents associated with your economic well-being will work in your favor.
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Submit all the related documents, making you trustworthy to the creditors. If there is an internet blackout, try to look for an alternative and calculate your financial standings online!
Putting Things Together
Checking your credit score and financial standing before applying for the car loan will help you save a lot of your and the lender’s time. If you have reached the minimum credit score, you should only then submit the application.
Nonetheless, if you are ahead of the minimum score and have an impressive profile, you will be able to get a brand new car through an auto loan smoothly!
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