The more you know…
We read a lot of shocking news related to the car hobby, but when we ran across a recent report from the Independent Record out of Montana, well we had to stop for a moment. The headline “Bad Credit Car Loans Can Have Sky-High Interest Rates” captivated us because it was like reading “Touching Water Will Make Your Hand Wet” or “Breathing Air Will Keep You Alive.”
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Apparently, the newspaper felt that some of its readers don’t understand how a poor credit score affects their ability to borrow money for a car loan. But after thinking about it for a minute, we’re pretty sure a significant portion of the North American population has no idea that’s a thing. And our faith in humanity is once again shaken.
You learn this lesson really quickly when you go to a car dealership and try buying something that’s a bit of stretch, only to learn your poor credit means you’re relegated to a Kia or Hyundai. Poor credit literally diminishes your borrowing power because lenders view you as a higher risk.
According to a handy chart used in the article, which comes from Experian, the average super prime (800 to 850 credit score) interest rate for a used car is 3.69% and for a new one is 3.84%. However, if you’re a subprime borrower (580 to 669 credit score) those figures are 15.86% and 10.11%, respectively. Just one percent difference in a car loan can have a huge impact on what you can afford to buy.
With the price of cars coming down after being so high, this is definitely something to keep in mind if you think you might go car shopping in the near future. Checking your credit report for accuracy and taking care of any problems on it could be the difference between being the victim of a certain TikTok challenge and driving something decent.
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