Edmunds Answers

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  • franf 01/17/09 11:29 pm PST

    Since you are only seeking a $3,500 loan (plus another $1,000 or so for taxes, doc, license depending on your part of the country), you probably are in a better position than you think. Depending on the age of the car, I might start out by talking to a credit union. They are much more transparent to deal with than a dealership. The rates are often clearly explained at the credit union's website, and while they may be a bit higher for a low credit rating, these folks are usually very easy to talk with. So it's a "safe" starting point.

    Also, you say the asking price is $11,000. I assume you haven't negotiated yet. You may actually be seeking a smaller loan if you get the price down to say $10,500.

    With all respect, if you have a low credit rating, I assume you are not a homeowner. But on the offchance that you have a home equity line, this could be a great option for you. The interest is deductible and depending on the specific equity line, you may have some flexibility in say getting a fixed rate for a fixed time. And, pardon me if you have recently lost a home to foreclosure and are suffering a credit score drop. So many folks are in this position.

    Hope this gives you some direction. Good luck.

  • weggieesq 01/15/10 4:42 pm PST

    With a credit score of 550, the first thing you should do is look at is your credit report. If all the information is correct and there is no way to increase your score then you still may have a chance to finance through special financing. The rules to qualify have tightened, but if you have the income to support the purchase then it may be possible. Your interest rate will be incredibly high. I’ve seen them over 20%. One thing to remember, if you are financing through a dealership everything is negotiable, even the interest rates. Dealerships are provided with buy rates which are lower than a regular customer could get. The dealership then tacks on it’s cut and gives you the rate. For example, the bank is offering loans at 8%, a dealership gets a 6% buy rate and can offer the loan to you for 8%, 7.5%, or whatever. If they offer you the loan at 6% then they make no money from the financing. Of course with your situation, you’re probably looking at a buy rate of 18% minimum.

  • 04350 01/16/10 9:11 am PST

    Credit unions aren't necessarily that great when it comes to car loan interest rates. On new vehicles, their rate is rarely lower than what a dealer has available for customers with a good credit history. On used vehicles, then they're more competitive. What they do is that if you would have automatic deposit of your paycheck, they would do an automatic withdrawal every 2 weeks from your account there.




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