Cars & Credit Assistance

Purchasing a car on credit at a competitive interest rate requires a good credit score. Credit scores are three-digit numbers ranging from 350 to 850. People with scores of 720 or higher usually receive the best deals on financing, including special offers for waiving finance charges over a a certain period. Auto credit is also available to people with lower credit scores, but at higher interest rates.

Sources

Banks and credit unions usually offer the best deals on auto financing, and credit unions are often more competitive than banks, according to Bankrate. People shopping for a car should shop for the loan first and then the car. This allows the buyer to separate the transactions and get the best deal on each. Car dealers often mix in financing with discussions about the price of the car, sometimes making it difficult for the buyer to achieve a bargain on either.

Bad Credit

Credit qualifications vary widely depending on the lender. Most auto financing requires a credit check, but that's only one thing lenders consider. Credit scores below 620 are usually considered poor, but it is possible to secure auto financing with scores much lower. Some dealers advertise that they can provide financing for almost anyone, including people who are in bankruptcy or have suffered from court judgments, foreclosures, late payments and charge-offs. Interest rates on bad credit auto loans are usually exorbitant, however, easily ranging from 18 to 25 percent.

General Qualifications

People shopping for auto credit should have a job or show proof of regular income, such as a pension. Stability is also important, as creditors prefer applicants having worked on the same job for at least the past two years, ideally. The borrower must have enough income after living expenses and other credit obligations to afford the anticipated monthly payment. Down payments are usually required, but the amount depends on the credit rating and the borrower's income. Some people are required to pay large down payments because of poor credit or to lower the monthly payment so that it fits the borrower's income level.

Reposession

Repossession is possible when people fail to pay their auto loans as agreed. Collection calls begin after the first missed payment, with repossession likely after two or three missed payments. Repossessions are listed on credit reports for seven years, and make it very difficult to finance another vehicle at a reasonable interest rate or down payment. Auto repossessions are sold at auction or private sale, with the former owner responsible for paying any difference in the sales price and the balance remaining on the loan.