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Is There a Minimum Credit Score for a Car Loan?

Is There a Minimum Credit Score for a Car Loan?

Despite the global situation, the car market is gradually collecting itself, shaking itself down and picking itself up again. We have seen an increase in online car buying and car loan applications so it seems we are all getting used to the new reality. Which brings us on to this question we have hear frequently over the past few months, ‘What is the lowest credit score you can have and still get a car loan?’


We have heard it enough that it warrants its own blog post.


Is there a minimum credit score to qualify for a car loan?


You will be pleased to know that there is no minimum credit score required to apply for a car loan. Different lenders set their own criteria to who they will accept but there is no ‘official’ minimum score.


The lower your score, the less chance you have of qualifying for a loan with particular lenders and the more interest you’ll pay. But you can still get a loan.


The team at Car Nation Canada specializes in bad credit car loans so we can definitely help.


Credit score ratings


There are five main tiers that credit scores are sorted into. They are:


  • Super Prime – scores of 781 to 850
  • Prime – scores of 661 to 780
  • Nonprime– scores of 601 to 660
  • Subprime – scores of 501 to 600
  • Deep Subprime – scores of 300 to 500


Source: Experian State of the Automotive Finance Market, Q2 2020.


Credit score and loan interest


Your credit score doesn’t necessarily stop you qualifying for a loan. It may limit the lenders who will work with you though. It will also increase the interest rate you’ll pay. There can be up to 10% difference in interest between a deep subprime loan and a Super Prime loan!


Depending on your loan, the monthly amount won’t have a huge difference, but over the term you could be paying thousands more in interest as a Deep Subprime or Subprime borrower.


Bad credit car loans


Bad credit car loans are for borrowers in Subprime or Deep Subprime positions. They are specialist loans, often provided by specialist lenders used to dealing with people with less than perfect credit records.


Most lenders know that the vast majority of people in this position are there through no fault of their own and are willing to work to help you out. You will pay more in interest with bad credit car loans but otherwise they work the same as a standard loan.


Once your credit score has improved to nonprime status, you can consider a standard loan which will be cheaper. Much depends on your situation at the time.


If you’re thinking of getting a car loan and need professional advice, the team here at Car Nation Canada are always willing to help!

Categories: Car News