Getting a car loan with a reasonable interest rate is the best way to save thousands of dollars that you would have repaid during your loan term. Several factors affect the interest rate banks will offer you; the dominant one is your credit score. When getting Auto Loans, it is essential to research and ensure that you get the best deal you qualify for. On average used car loans have an interest rate of between five and twelve percent.
Rating Average Used Car by Credit Score
When looking for an auto loan, it is essential to have realistic expectations about the amount you are likely to be approved for, as loan terms and the interest rate are likely to be offered by the lender. These rates are not fixed, but typically persons with excellent credit scores of 750 or higher can expect to pay interest rates about five percent APR.
Average Used Car Loan Rate for Persons with an Excellent Credit Score
The better your credit score, the more attractive the terms auto lenders are likely to offer you. Consumers with top-notch scores enjoy the lowest financing rates for used cars. If your credit score is higher than 750, you can expect to enjoy a rate of 6.58% APR. Auto lenders consider such borrowers as low risk and much more likely to make their monthly payments and pay back the loan as per the contract.
If you are in this range, you qualify for certified used cars, which come with special financing incentives by car manufacturers.
Average Used Car Loan Rate for Persons with an Excellent a Good Credit Score
Consumers with a credit score between 700 and 749 are considered good credit. If you fall within this category, you can expect an interest rate of around 10.89% APR. While you may have some dings on their credit record, auto lenders still put you in the low-risk category. You can expect to enjoy lower than average interest rates from banks, credit unions and online auto lenders. However, it will be challenging for you to qualify for the special financing incentives offered by automakers.
Average Used Car Loan Rate for Persons with a Fair Credit Score
Borrowers with a credit score between 600 and 699 are considered fair. If your credit score falls within this range, you can expect an average rate of 14.52% APR. It will be much more expensive to buy a used car than consumers with better credit scores. Your interest is likely to be much higher than double offered to prime and super-prime borrowers.
Do not despair because there is a simple way to reduce your interest’s total amount. The best way is to make all your payments for more than a year and apply for refinancing. The interest rate will be much lower when refinancing because you will have demonstrated your track record of making payments on time. You will also have built up significant equity in the car, which will also reduce your interest rate.
Average Used Car Loan Rate for Persons with a Poor Credit Score
If your score ranges between 451 and 599, lenders categorize you as a subprime borrower due to your bad credit. Auto lenders consider you less likely to make monthly payments on time and finish paying off your loan. Some lenders refuse to lend to subprime borrowers on any terms. Those who take the risk charge an extra credit risk by offering interest rates that are much higher than those offered to prime borrowers. Consumers in this category can expect an average interest rate of 17.77%.
You can lower your interest rate by faithfully making your payments for more than a year and applying for refinancing on the car.
Average Used Car Loan Rate for Persons with a Credit Score Below 450
Anyone with a credit score below 450 is considered a subprime borrower and will have difficulty convincing any lender to offer them an auto loan. Any lender willing to take such a high risk will likely charge very exorbitant interest rates that add thousands to the car’s final price. Such auto loans are often offered by unscrupulous lenders seeking to trap desperate borrowers in a debt trap that is very hard to escape.