Why it can be difficult to determine the interest rate you can expect from a problem credit auto loan

Bad credit auto loans

One of the first things individuals with bad credit want to know is the interest rate they are going to be charged on no credit auto loans.

In fact, most of the questions we get asked haven't really changed in the nearly two decades we've been involved in bad credit car sales here at Auto Credit Express.

In addition to answering questions, we also show applicants why a tote the note dealer won't help their credit scores and we spell out the approved auto loans process so they can sidestep many of the problems that result in repossession.

We can't, however, tell applicants what their interest rate will be.

Interest rates

For people with great or even good credit (great is a FICO score of 740 or more while good is between 680 and 739), lenders assign an interest rate based on their credit score. This is why comparing interest rates is easy if you have good credit.

Even individuals with a FICO score of 620 to 679 have a chance of getting an interest rate based on their credit score alone.

But when FICO scores fall below 620 to 640, most traditional lenders won't consider your application. Instead, you'll need to apply for bad credit auto loans.

Looking past credit scores

Lenders that offer approved auto loans with bad credit look past credit scores and, using special scoring methods, consider a number of other elements to determine if you qualify as well as the interest rate you'll receive.


Can you afford a car payment? This is the first thing lenders look at. They look at how much you earn and what is left over after your bills are paid each month. A typical bad credit lender wants all of your debts, including a car payment, not to exceed 40% to 50% of your monthly income. The lower this debt-to-income (DTI) ratio is, the better you will score.

Lenders also prefer a monthly car payment under 15% to 20% of your total monthly income. The lower this payment-to-income (PTI) ratio is, the better you will score.

A large down payment also helps. Down payments reduce the loan to value (LTV) ratio which reduces the lender's risk. The lower the LTV ratio of the loan, the better you will score.


Bad credit lenders also look for stability. Stability covers how long you've been employed at the same job or in the same field as well as how long you've lived at your current address.

Lenders look for one year with your current employer, and will score you higher for additional job tenure. With a shorter job time, more weight is given if you've remained in the same industry or have switched employers due to job experience.

Living at the same address or in the same geographical area for an extended time indicates that your financial situation has been stable. People who move around are considered “skip hazards”. If they have to repossess a vehicle, lenders want to know where they can find it. The longer you've been at your current residence, the better you will score. Because it's more difficult to move if you own your home, homeowners will score higher than renters.

Willingness to pay

Lenders will also check your credit report to see how you've paid your past bills in the past – especially any auto loans. If there is some “slow pay”, they'll check to see if it's “situational” or “habitual” bad credit.

If slow payments are the result of one incident, such as a layoff or medical emergency, it's called “situational” bad credit. If you've never paid anyone on time, this is “habitual” bad credit. Applicants with situational bad credit will score better than those with habitual bad credit, since situational applicants have exhibited good credit behavior in the past.

As we see it

Ability, stability and willingness to pay are all taken into account when determining interest rates and approved auto loans, so you can see why the answer to the interest rate question is not as simple as it seems.

That's why Auto Credit Express helps individuals with bad credit find a dealer that can get them financed for no credit auto loans.

So if you are serious about establishing your car credit, you can begin now by filling out our online car loans bad credit application.