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Can I Get a Car Loan (640 Credit Score)? Rates & Tips

  • A 640 credit score can qualify you for a car loan, but expect higher interest rates between 10% and 15%.
  • Improve your chances by fixing credit report errors, making larger down payments, and demonstrating financial stability.
  • Call The Credit Pros for personalized support to potentially enhance your credit score and secure better loan options without delay.

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Related content: Can I get a car loan with a 600 credit score? Interest rates? Options?

You can get a car loan with a 640 credit score, but be ready for higher interest rates, usually between 10% and 15%. Lenders see you as a higher risk borrower, so your options and terms will be limited. To improve your chances, show off your steady income, solid employment history, and wise debt management.

Before you apply, check your credit report for mistakes and fix any issues. Try to make a larger down payment to get better loan terms, and shop around for the best rates from lenders like OneMain Financial and local credit unions. These steps can help you find better financing options and lower monthly payments.

For personalized help, call The Credit Pros. We’ll look at your three-bureau credit report and give you tailored support based on your situation. Don't let a 640 credit score slow you down—taking action now can lead to better car loan deals.

On This Page:

    Is A 640 Credit Score Sufficient For A Car Loan?

    Yes, a 640 credit score is usually enough for a car loan, but it can make getting the loan more difficult. Lenders see a 640 score as "fair" credit, meaning you are a higher-risk borrower. While many lenders accept scores around 600, a 640 score may result in higher interest rates.

    To improve your chances, demonstrate strong qualifications in other areas:
    • Show stable income and a good employment history.
    • Manage other debts responsibly.

    Shop around for different lenders to find the best rates. Improving your credit score before applying can also help you get better terms.

    At the end of the day, securing a car loan with a 640 credit score might lead to higher monthly payments, but options are available if you take proactive steps.

    What Interest Rates Can I Expect With A 640 Credit Score?

    With a credit score of 640, you can expect higher interest rates on car loans compared to borrowers with higher scores. Generally, interest rates for individuals in the "Fair" credit score range (580-669) range from about 10% to 15%, depending on the lender and specific loan terms. Currently, the average auto loan interest rate for new cars is around 6.73%, while used cars average about 11.91%, as reported by Experian. With a 640 score, you may find rates closer to the higher end of this range.

    Lenders also consider your income, debt-to-income ratio, and the type of vehicle you want to buy. Rates can differ depending on whether you purchase from a franchise dealer or an independent dealer, with franchise dealers often providing slightly better financing options.

    To improve your chances of securing a lower rate, consider:

    • Checking your credit report for errors.
    • Paying down debts.
    • Making timely payments.

    Exploring diverse lending options or getting pre-approved can also help you understand available rates better. Lastly, remember your credit score is just one part of securing a loan; approach lenders with a comprehensive financial picture to enhance your chances.

    How Does A 640 Credit Score Impact Loan Terms?

    A 640 credit score significantly impacts your loan terms. With this score, lenders usually see you as a subprime borrower, making you a higher risk for default.

    • Interest Rates: You will likely face higher interest rates compared to borrowers with higher scores. Lenders do this to offset the perceived risk.

    • Loan Approval: Although you can qualify for loans, your options might be limited. Some lenders may even reject your application or require a co-signer or a larger down payment.

    • Loan Amounts: You may not be able to borrow as much as someone with a higher score, which can limit your purchasing power.

    • Flexible Terms: Loan terms might be less favorable. You could encounter shorter repayment periods or stricter conditions.

    Finally, a 640 credit score impacts your loan terms by limiting your options, raising your interest rates, and potentially imposing stricter lending conditions. To explore better financing options, consider checking the section on interest rates next.

    What Are The Best Lenders For A 640 Credit Score?

    The best lenders for a 640 credit score include a mix of traditional banks, credit unions, and online financial institutions. You can explore options like OneMain Financial, Upgrade, and Prosper, as they cater to borrowers with fair credit.

    OneMain Financial provides personal loans with flexible terms. Their approval process is accessible to you if your credit score is around 640. Upgrade offers loans suitable for those with fair credit, often with competitive rates and transparent fees. Prosper focuses on peer-to-peer lending and can offer you rates comparable to more traditional lenders.

    Local banks and credit unions are also good options. They may have programs specifically designed for you if your credit score is near 640, often with more favorable terms. You should get prequalified with these lenders to assess what rates and amounts you might qualify for without affecting your credit score. If you need to, consider using a cosigner with better credit to improve your chances of approval.

    Using platforms like Acorn Finance lets you compare offers from multiple online lenders efficiently and for free. This can help you find the best terms for your situation. Big picture-you should explore various lenders, consider prequalification, and compare offers to find the best fit for your credit score and needs.

    Inaccuracies hurting your Credit Score?
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    By clicking ‘Get Started’ I agree by electronic signature to: (1) be contacted by The Credit Pros by a live agent, artificial or prerecorded voice, and SMS text at my residential or cellular number, dialed manually or by autodialer even if my phone number is on a do-not-call registry (consent to be contacted is not a condition to purchase services); and (2) the Privacy Policy and Terms of Use.

    Should I Try To Improve My Score Before Applying For A Car Loan?

    Yes, you should try to improve your score before applying for a car loan. A higher credit score can lead to lower interest rates and better loan terms. Even a small increase in your score can save you significant money over the life of the loan.

    Check your current credit score to know where you stand. If it’s below 670, work on improving it. Focus on these steps:

    • Pay your bills on time. Late payments drastically impact your score.
    • Check your credit report for errors. Dispute inaccuracies to potentially raise your score.
    • Keep your credit utilization below 30%. Pay down high balances first.
    • Avoid opening new credit accounts shortly before applying for a loan, as this can hurt your score.

    We advise you to take time to enhance your credit profile. Doing so can improve your chances of loan approval and result in more favorable financing conditions. Each lender may have different score requirements, but many favor scores above 670. Improving your score can help you avoid higher interest rates, potentially saving thousands over the loan period.

    Overall, focusing on your credit score now can make a real difference when you're ready to get that car.

    How Much Down Payment Do I Need With A 640 Credit Score?

    With a 640 credit score, you typically need a down payment of 3.5% for an FHA loan. This option is popular and accessible for individuals with a credit score in the fair range. Other loan types may vary, but conventional loans usually require at least 5% down.

    If you're considering a USDA loan, you don't need a down payment as long as you meet the eligibility criteria for properties in rural areas. VA loans also require no down payment but are only available to veterans and active service members.

    Your specific down payment can also depend on your overall financial profile, including your income and existing debts. Improving your credit score can help you secure better terms.

    As a final point, understanding your down payment options based on your 640 credit score can significantly influence your home-buying experience and help you make informed decisions.

    Can I Get Pre-Approved For A Car Loan With A 640 Credit Score?

    Yes, you can get pre-approved for a car loan with a 640 credit score. While a 640 credit score is considered fair, many lenders are still willing to approve loans for this credit range. However, you might face challenges like higher interest rates and less favorable loan terms.

    You should start by checking with credit unions or banks, as they typically offer better rates and terms compared to traditional dealers. Some lenders, such as Capital One or PenFed, allow you to pre-qualify without impacting your credit score. This increases your chances of finding suitable terms.

    To improve your approval odds:

    • Consider making a larger down payment.
    • Compare offers from several lenders to find the best deal.
    • Work on improving your credit score before applying to potentially secure better terms.

    To put it simply, you can get pre-approved for a car loan with a 640 credit score, but you should be prepared for higher costs and take steps to improve your chances.

    Risks Of Car Financing With A 640 Credit Score

    The risks of car financing with a 640 credit score - credit score include higher interest rates, limited loan options, and potentially unfavorable terms. With a score in the fair range, lenders may classify you as a higher risk, so you probably won't qualify for the lowest interest rates.

    • Higher Interest Rates: You can expect interest rates to be significantly above what someone with a higher score might receive. This means you'll pay more over the life of the loan.

    • Limited Lender Options: You'll find fewer lenders willing to work with you. Many prefer borrowers with better credit scores, limiting your ability to compare offers and find a favorable deal.

    • Shorter Loan Terms: Lenders might offer shorter repayment periods, leading to higher monthly payments. This can strain your finances and make budgeting challenging.

    • Higher Down Payment Requirements: Some lenders might require a larger down payment to offset the risk posed by your lower credit score.

    • Additional Fees: You could encounter higher fees associated with the loan, further increasing your overall costs.

    You should weigh these risks carefully. If possible, consider improving your credit score before applying. Enhancing your score can lead to better financing options, as we’ll discuss in our upcoming section about the best lenders for a 640 credit score. In short, taking steps to improve your score can significantly affect your car financing experience, making it more manageable and affordable.

    Inaccuracies hurting your Credit Score?
    Securely review your full 3-bureau Credit Report (with a real expert).

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    Is Financing Through A Dealership Better For 640 Credit Scores?

    Financing through a dealership can be a viable option if you have a 640 credit score, but you should understand the implications. Dealerships often offer more flexible financing options, but they might not provide the best interest rates. With a fair credit score like yours, you could face higher interest rates and monthly payments compared to prime borrowers.

    You may have a higher chance of getting approved through a dealership versus a traditional bank, as dealerships are motivated to approve loans for borrowers with lower credit scores. However, be cautious of high interest rates which can lead to costly monthly payments.

    Before visiting the dealership, explore pre-approval options with lenders like Capital One or PenFed. This gives you a clear understanding of your financing options and strengthens your bargaining position. To finish, ensuring you explore all available options beforehand can help you secure a better deal and avoid settling for less favorable terms due to the convenience of dealership financing.

    Required Documents To Apply For A Car Loan With A 640 Score

    To apply for a car loan with a 640 credit score, you need to gather several important documents. Here’s what you should prepare:

    • Proof of Identity: Bring a government-issued ID such as a driver's license, passport, or U.S. visa to verify your identity.

    • Social Security Number: Provide your Social Security number so the lender can check your credit.

    • Proof of Income: Document your income with recent pay stubs, W-2s, or bank statements. If you're self-employed, prepare 1099 forms or a profit and loss statement.

    • Proof of Residence: Show evidence of where you live, like a utility bill or lease agreement.

    • Insurance Information: Have proof of car insurance ready, as most lenders require it before you finalize the loan.

    • Credit History Information: Although they'll pull your credit report, bring any relevant documents detailing your credit history.

    Check with the lender for any additional requirements. In essence, being prepared with these documents will make your car loan application process smoother and more efficient.

    How Can I Lower My Car Loan Monthly Payments With A 640 Credit Score?

    To lower your car loan monthly payments with a 640 credit score, you can try several strategies:

    First, consider refinancing. You might find lenders offering lower rates, especially if your credit has improved. Use an auto refinance calculator to estimate savings.

    You could also adjust your loan term. Extending the term will reduce your payments but increase the total interest. Weigh the long-term costs carefully.

    Ask your lender about loan modification options. They may lower your interest rate or extend the loan term to help reduce your payments.

    If possible, make a larger down payment. This reduces the loan amount and your monthly payments. Savings or proceeds from selling an old vehicle can be useful here.

    Communicate with your lender. Explain your financial situation, and they might defer a payment or offer more manageable terms.

    Consider trading in your current car for a less expensive one. This can provide a cash-down payment for a new loan and lower your monthly payments.

    To wrap up, explore refinancing, extend your loan term, modify your loan, make a larger down payment, negotiate with your lender, or trade in your vehicle to manage your payments better.

    Common Mistakes When Applying With A 640 Credit Score

    Common mistakes when applying with a 640 credit score include:

    • Not checking your credit report: Before you apply, check your credit report for errors. Mistakes can lower your score and affect your approval chances. You can get your report from AnnualCreditReport.com.

    • Missing payments: Payment history is crucial. One late payment can significantly harm your score. Always pay your bills on time.

    • High debt utilization: Using more than 30% of your available credit can negatively impact your score. Keep your balances low relative to your limits.

    • Taking on unnecessary debt: Avoid applying for multiple loans or credit cards before seeking a loan. Each new application can hurt your score.

    • Closing old credit cards: Closing accounts reduces your credit history length, which can lower your score. Keep old accounts open to maintain your credit history.

    • Ignoring pre-approval options: Seek pre-approval from lenders to understand your potential rate and terms without negatively impacting your score.

    On the whole, avoid these mistakes to improve your chances of getting favorable loan terms. For more insights, review other sections of our article about getting a loan with a 640 credit score, where we discuss interest rates and best lenders tailored for your score.

    Inaccuracies hurting your Credit Score?
    Securely review your full 3-bureau Credit Report (with a real expert).

    By clicking ‘Get Started’ I agree by electronic signature to: (1) be contacted by The Credit Pros by a live agent, artificial or prerecorded voice, and SMS text at my residential or cellular number, dialed manually or by autodialer even if my phone number is on a do-not-call registry (consent to be contacted is not a condition to purchase services); and (2) the Privacy Policy and Terms of Use.

    How Does Employment Impact Auto Financing With A 640 Score?

    Employment significantly impacts auto financing with a 640 credit score. Your job status reflects your income stability, which lenders view as a good indicator of your ability to repay loans. This could increase your chances of approval.

    When you apply for a car loan, lenders typically require proof of employment. Being employed boosts your credibility because it shows that you have a reliable income to cover monthly payments. If you're employed, you might also qualify for better loan terms.

    Having a job gives you better access to various credit options, often leading to more favorable interest rates compared to being unemployed. A stable job enhances your overall financial profile, making you a more attractive candidate for financing.

    Bottom line: If you have a job, you will likely secure auto financing more easily, even with a 640 credit score. Your employment status plays a crucial role in determining your financial capabilities.

    What Car Financing Alternatives Exist For 640 Credit Score Borrowers?

    If you have a 640 credit score and need car financing, several alternatives can help you out.

    First, you can apply for a loan through a credit union. They often offer better rates and pre-approval options than traditional banks.

    Another option is dealership financing. Dealerships work with various lenders, increasing your chances of approval. However, interest rates might not be the best.

    Consider subprime lenders. These specialize in offering loans to those with fair credit scores around 640.

    You can also look into Buy Here Pay Here dealerships. They provide direct financing and may accept lower credit scores, but watch out for high interest rates.

    If traditional auto loans aren't working, personal loans could be a solution for financing your vehicle.

    Getting a co-signer with better credit can improve your approval chances and lower interest rates.

    Don't forget to use pre-qualification tools from lenders like Capital One or PenFed. These let you check loan options without impacting your credit score.

    In a nutshell, you should compare different options to find the best deal for your unique circumstances, keeping your budget and credit health in mind.

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