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Bad credit car loan rates will vary depending on how bad your credit rating actually is. Generally the lower your FICO score the higher the interest will be. Now that may sound pretty straightforward, however, there’s a big “but” in here because it is far from simple. There’s much more that goes into calculating the bad credit car loan rates.

Let’s look at the factors lending institutes will consider: It begins with a look at your credit report. The lender will be determine how big of a risk you are by looking at your credit history, which will show how well you make your payments. The lender is going to scrutinize previous vehicle loans very carefully. If you paid your car payment on time every month the lender is going to see this ant it is going to be in your favor. If you have a track record of making payments on time this will help you to get an interest rate that’s lower, which will save you significant money.

The lender will also have a look at your income to expense ratio. The lender wants to ensure you have the funds available to make your car payment and sill live. The better this ratio the more likely the interest rate will be lower. Having a down payment can help you get a better interest rate.

The bigger the down payment the more effective this strategy is. If you are able to put 15% down on your vehicle the lender has a lower risk and in return you receive a better interest rate. Finally, the lender will look at the vehicle and determine whether it will hold its value throughout the loan’s term.

The lender will consider the vehicle’s year, mileage, and of course make and model to make this determination. The car is the banks collateral so they want to make sure they’ve covered themselves. The higher the vehicles value the lower the interest rate. Now that you know how to reduce your bad credit car loan rate what are you waiting for?