If you have good or superb credit, you should have no problem getting an auto loan right now. If you have bad credit, you may be approved, but you’ll pay more in interest. More car shoppers are getting approved for car loans right now due to the government’s TALF program and looser credit, the AP reports.
Here’s the good news for car shoppers who need an auto loan:
- Lenders are starting to relax credit standards a bit.
- The TALF program guarantees the auto loans when bundled and sold to investors, which allows banks, credit unions and auto finance companies to free-up more money to make more auto loans for consumers.
- Car loan interest rates are still at record low levels, meaning consumers will pay less over the life of the car loan.
- Financial firms wrote 5.5 percent more auto loans in the third quarter compared with the previous three months, according to Experian Automotive.
- If you have a good or excellent credit score, it will cost you less to borrow money for the vehicle, as the average interest rate for top tier consumers is down from 6.65% a year ago to 5.74% now, the AP reports.
- Used car loans are reportedly more appealing to lenders as used car prices have stabilized.
Here’s the bad news for car shoppers who need an auto loan:
- If you have bad credit, usually a credit score below 600, you will receive a higher interest rate if approved for the car loan. The average interest rate for consumers with a credit score of 500 to 589 has increased from 16.47% a year ago to 18.56% now, the AP reports.
Clearly the good outweighs the bad for consumers who are in the market for an auto loan. With record low interest rates and lenders more willing to approve auto loans, the focus shifts to credit. Again, consumers with good or great credit shouldn’t have a problem, but those with bad credit should either work on improving their credit score or simply prepare themselves to pay the higher interest rate.
Overall, the increase in auto loan lending is good for the entire automotive industry, since it means more vehicles will be sold.