Car Loan with a 540 Credit Score

by Shannon
(Dallas, TX)

Question: Need a car loan with 540 credit score +... My credit scores are 540, 585, 540. I make 60k a year and I have had a steady job for 8 years, a paid off car and a low debt ratio. Do you think I can get a decent car loan?

Answer: The type of car loan you are able to get will depend on a number of factors and credit score will play an important role in that, but will not be the only role.

First thing will be the lender that you'll be financing with and what credit bureau they use in your area. This is probably the least important though since all three credit scores fall into a non/sub-prime range.

Because of that I will just assume the worst and figure everything based on the 540 scores.

Next, I'll use Chase as an example... They will not so much care what your score is and will base their decision on other factors. Your overall stability (you're real good), can you afford it (you're good here too) and lastly what the loan structure looks like (I'm not sure).

With 540 scores, the better the loan looks to them (regardless of score) the lower rate they will give you.

How do you make the loan look good to them?

Use as large a down payment as you can, finance for 60 months or less and look to buy a newer car (3 years or newer) with
lower miles (under 40k miles).

How big a down payment?

If it is possible to both negotiate the sale price down and use enough money down to only finance 80% of the wholesale value (before adding for warranty, if you choose), then that would be best.

Before I had explained that, I would have given a very general answer and figured a car loan with 540 credit score in the 18-22% range.

But, if you are able to meet the things I laid out above you could possibly find yourself in the 14-16% range.

I'm not sure of what you will consider a decent car loan with a 540 credit score, but I would consider this a good range.

Another key here is that you can apply with Chase directly, but I don't know that you'd get approved, because you do fall into that non/sub-prime range. Most lenders that will loan in this range will only work through dealers.

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Of course, there are many variables that I am not aware of -mainly additional credit issues - and I couldn't guarantee these rates, but piecing things together and in my experience this is about where you'd be.

You'd probably need to get your credit scores in the 640 or higher range before you could expect much better than this (assuming no other major credit issues are holding you back).

Hope this helps,

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