How Much of a Car Loan Can I Get With a 650 Credit Score?
Unlock your car loan potential with a 650 credit score. Understand key factors and navigate the financing process to secure favorable terms.
Securing a car loan is a common step for many seeking vehicle ownership. The amount and terms of a car loan are heavily influenced by your financial standing, especially your credit score. For those with a 650 credit score, understanding its implications is important, as this score affects potential loan amounts and interest rates.
What a 650 Credit Score Means for a Car Loan
A 650 credit score falls within the “fair” or “nonprime” range for common credit scoring models. Lenders view a 650 score as indicating a moderate level of risk. While sufficient for loan approval, it will lead to higher interest rates compared to borrowers with excellent credit. For example, the average interest rate for a used car loan with a 650 credit score was around 13.74% in the first quarter of 2025, according to Experian data. This contrasts with prime borrowers (scores 661-780) who might see rates around 9.06% for used cars.
Your credit score significantly impacts the cost of borrowing. A higher interest rate means a larger portion of your monthly payment goes toward interest rather than the principal. For example, a borrower with a 650 credit score taking out a $20,000 five-year used-car loan might have monthly payments around $463, accumulating approximately $7,760 in interest over the loan’s life. While a 650 score allows for loan access, the terms will reflect the perceived risk.
Other Key Factors Determining Your Loan Amount
Beyond your credit score, several other factors influence the maximum car loan amount a lender will offer. Your income and existing debt obligations are closely scrutinized through your debt-to-income (DTI) ratio. Lenders assess your stable income, requiring a minimum gross monthly income ranging from $1,500 to $2,500. The DTI ratio calculates the percentage of your gross monthly income that goes towards debt payments, including the prospective car loan.
Most lenders prefer a DTI ratio below 36%, indicating manageable debt. Some subprime lenders may approve loans for DTI ratios up to 45% or even 50%, though this often comes with less favorable terms. For instance, if your monthly income is $4,800 and your total monthly debt payments are $1,325, your DTI would be approximately 28%.
A down payment can also increase the loan amount you are approved for, even with a 650 credit score. Providing a larger down payment reduces the amount you need to borrow, which lowers the lender’s risk. For example, some lenders might require a minimum down payment of 20% of the vehicle’s total amount for borrowers with a 650 credit score.
The specific vehicle you choose plays a role in the loan amount. Lenders consider the car’s type, age, and value, as the vehicle serves as collateral. A new car, holding its value better, might qualify for different terms than a used car. The loan term, or repayment period, also affects the principal amount lenders are willing to offer. While longer terms can reduce monthly payments, they increase the total interest paid over the loan’s life.
How to Prepare for a Car Loan
Preparing thoroughly before applying for a car loan can enhance your chances of approval and secure better terms. Begin by gathering all necessary financial information and documents. This includes proof of income, such as recent pay stubs or tax returns if you are self-employed. Lenders also require identification, such as a driver’s license, and proof of residence, like a utility bill or lease agreement.
It is advisable to obtain and review your credit report from one of the three major credit bureaus (Experian, Equifax, or TransUnion) before applying. This allows you to check for any inaccuracies or errors that could negatively impact your score and dispute them if found. Understanding your credit history helps you anticipate how lenders will view your application.
Establish a realistic budget for your car purchase. Determine an affordable monthly payment amount based on your personal finances, distinct from what a lender might pre-approve you for. This ensures you do not overextend yourself financially, considering all your other monthly expenses.
Consider exploring pre-qualification options with various lenders. Pre-qualification involves a “soft credit pull,” which does not affect your credit score and provides an estimate of the loan amount and interest rate you might qualify for. This differs from pre-approval, which often involves a “hard credit pull” and indicates a more concrete loan offer.
Navigating the Car Loan Application
After completing your preparatory steps, navigate the car loan application process. Choose a lender, considering options such as traditional banks, credit unions, or financing offered directly through a dealership. Each lender type may have different rates, terms, and application procedures.
The application submission process involves providing the gathered information and documents to your chosen lender. This can be done through online application portals, or by submitting paperwork in person at a bank, credit union, or dealership. The lender will then review your financial profile, including your income, debt, and credit history, to assess your eligibility and determine loan terms.
When you receive loan offers, review all elements. Pay close attention to the interest rate, the Annual Percentage Rate (APR), the loan term, and any associated fees. The APR provides a comprehensive measure of the loan’s cost, as it includes both the interest rate and certain fees. Comparing offers from multiple lenders can help you secure the most favorable terms available.
After submitting your application, expect approval within a few hours to a few business days, depending on the lender and application complexity. Lenders may request additional information or documentation to finalize their assessment. Once approved, the final step involves signing the loan documents for the vehicle purchase.