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Understanding Auto Loans and Credit Scores with O1ne Mortgage
At O1ne Mortgage, we understand that navigating the world of auto loans can be complex. Whether you’re looking to buy a new car or refinance your current loan, your credit score plays a crucial role in the process. Call us at 213-732-3074 for any mortgage-related needs, and let our experts guide you through the journey with confidence.
What Credit Scores Do Auto Lenders Use?
Auto lenders may use different credit scoring models than what you typically see. Depending on the lender, they might use:
- FICO® Scores 8 and 9: These models provide a general look at your overall creditworthiness.
- FICO Auto Scores: Specific to the auto industry, these scores give lenders detailed information on your likelihood of repaying a car loan.
- VantageScore® 3.0 or 4.0: Created by Experian, Equifax, and TransUnion, these models use the same information as FICO to determine your creditworthiness.
While you can’t control which score a lender uses, your base FICO score can be a good indicator of your approval chances.
What Credit Score Do I Need for an Auto Loan?
There’s no standard credit score required for an auto loan. Lenders consider your credit score along with other financial factors like your income. Generally, a higher credit score improves your chances of securing a low interest rate and favorable loan terms.
Auto Loan Debt by Credit Score
Here’s a look at the average auto loan balances by FICO® score range:
- Poor (350-579): $19,459
- Fair (580-679): $23,475
- Good (670-739): $24,750
- Very good (740-799): $23,106
- Exceptional (800-850): $20,472
Higher scores often result in lower financing rates, allowing you to get more value while paying less in interest.
How Credit Scores Affect Auto Loan Rates
Here’s how your FICO® score can impact your auto loan rates:
| FICO® Score | APR | Monthly Payment | Total Interest Paid |
|---|---|---|---|
| 720–850 | 7.062% | $595 | $5,695 |
| 690–719 | 8.170% | $611 | $6,644 |
| 660–689 | 9.851% | $635 | $8,113 |
| 620–659 | 12.067% | $668 | $10,101 |
| 590–619 | 16.317% | $735 | $14,076 |
| 500–589 | 17.136% | $748 | $14,886 |
Note: Based on a $30,000 auto loan with a 60-month term.
Can You Get an Auto Loan With Bad Credit?
It’s possible to get an auto loan with bad credit, but the terms may not be as favorable. For instance, a good credit score might get you a 7.06% APR on a $30,000 loan, resulting in a $595 monthly payment and $5,695 in interest over 60 months. With poor credit, the APR could be 17.13%, raising the monthly payment to $748 and the total interest to $14,886.
Lenders also consider other factors like your credit report, debt-to-income ratio, and employment history. A strong financial profile can improve your chances of securing a lower interest rate.
How to Apply for an Auto Loan
Follow these steps to apply for an auto loan:
- Check Your Credit Score: Understand your chances of approval and potential loan terms. If your score is low, consider improving it before applying.
- Research Lenders: Compare multiple lenders to find the best fit and lowest costs.
- Have a Good Down Payment or Trade-In: Reducing the loan amount can save you money on interest and potentially lower your interest rate.
- Get Preapproved Before You Buy: Preapproval can help you secure better financing terms than what a dealer might offer.
At O1ne Mortgage, we’re here to help you navigate the auto loan process. Call us at 213-732-3074 for personalized assistance and expert advice.
Build Credit for Lower Rates
Improving your credit score can help you qualify for better auto loan rates. Practice good credit habits consistently to avoid high-interest loans. Additionally, consider signing up for Experian Boost® to potentially improve your credit scores instantly by getting credit for on-time payments of utility, telecom, rent, and streaming service bills.
For any mortgage-related needs, don’t hesitate to reach out to O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals with confidence.
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