Many consumers are aware that not having a good credit score can be very costly, but do you know how much it can affect you and your wallet? A bad credit score can result in higher monthly payments, and as a worst case scenario, result in being denied for lines of credit.
Meet our fictional characters Edward, Gregory and Andrew.
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Edward has an excellent credit score rating falling in the range of 720-850. Having an excellent credit score, Edward will qualify for some of the best offers and interest rates available. |
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Gregory has a good credit score rating falling in the range of 690-719. Having a good credit score, Gregory will qualify for lines of credit at decent interest rates. |
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Andrew has an average credit score rating falling in the range of 630-689. Andrew has been having some trouble with his finances and his credit score has consequently been affected. Andrew, out of the three consumers, will qualify for lines of credit, but at less desirable interest rates since he is seen as a bigger risk. |
Auto Loans
In this scenario our friends will be taking out an auto loan in the amount of $26,500. It is important to note that credit scores will only be one factor considered upon applying for an auto loan. Other factors considered include the length of the loan, the amount borrowed, and if the financing is for a used or new auto.
$26,500 Auto Loan - 65 months
|
Credit Score |
Interest Rate |
Monthly Payment |
|
| Edward |
Excellent 720-850 |
2.64% |
$437.98 |
| Gregory |
Good 690-719 |
6.14% |
$480.27 |
| Andrew |
Average 630-689 |
9.42% |
$522.08 |
Auto loan interest rates can have a more drastic variation compared to a home loan. A borrower with excellent credit can be offered a low interest rate at about 2-3%, while a borrower with average or less credit can be offered higher interest rates at about 10-18%.
Drive What You Want
A low credit score could result in limited options not only with terms, but also with what you can drive out of the lot with. Too many times consumers have gone into a dealership with a specific vehicle in mind such as a luxury vehicle. Once they are considered for financing they are limited with options for lower end vehicles, forcing them to forget about the snazzy convertible they were originally wanting.
Avoid a possible disappointment such as this and consider the following:
- Check your credit score before applying.
- Get an idea of what you could potentially be financed for, and get a pre-approval before walking in to the dealership.
- Checking your credit through a monitoring site can also assist you with avoiding any additional hard inquiries from reporting on your credit and further hurting your scores.
- Shop the model before you go to the dealership. You may find that Dealership A had some very good offers for a similar model sold at Dealership B for a higher price.
$26,500 Auto Loan - 65 months
|
|
|
|
|
| Monthly Payment |
$437.98 |
$480.27 |
$522.08 |
| Total yearly expense |
$5255.76 |
$5763.24 |
$6264.96 |
Due to Edward’s excellent credit score rating, he has been able to obtain the best interest rate and the lowest monthly payment of the three. Gregory on the other hand must pay $507.48 more a year than Edward, while Andrew with an average credit score must pay $1009.20 more yearly than Edward.
Is your credit score holding you back from your dream car? Are you paying too much for the car you are currently driving? Letting your hair down and driving off in a snazzy convertible can be possible! Contact MSI Credit Solutions today. We can provide you with a free, no obligation credit consultation to determine your needs and help get you one step closer to your dream car.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
*The information in this article has been provided strictly for educational purposes.
