How to Get a Car Loan with a 650 Credit Score

A 650 credit score sits right on the edge of what lenders consider "fair" and "good." While it’s not a terrible score, it’s also not high enough to guarantee the best interest rates or loan approvals. In today’s economy—where inflation, rising car prices, and higher interest rates make financing a challenge—securing a car loan with a 650 credit score requires strategy.

Understanding Your 650 Credit Score

Before diving into loan options, it’s important to know where you stand. A FICO score of 650 is just below the national average (which hovers around 715). Lenders see borrowers in this range as moderate-risk, meaning you may qualify for loans but likely at higher interest rates.

Why a 650 Credit Score Matters in 2024

• Tighter lending standards: Post-pandemic, many lenders have become more cautious.
• Higher interest rates: The Federal Reserve’s rate hikes have made borrowing more expensive.
• Increased competition: With used car prices still elevated, more buyers are seeking loans, making approvals tougher.

Steps to Secure a Car Loan with a 650 Credit Score

1. Check Your Credit Report for Errors

Before applying, pull your credit report from AnnualCreditReport.com. Dispute any inaccuracies—errors could be dragging your score down unnecessarily.

2. Save for a Larger Down Payment

A bigger down payment (at least 10-20%) reduces the lender’s risk and improves your approval odds. It also lowers your monthly payments and total interest.

3. Get Pre-Approved from Multiple Lenders

Don’t rely solely on dealership financing. Apply with:
- Credit unions: Often offer lower rates than big banks.
- Online lenders: Some specialize in fair-credit borrowers.
- Subprime lenders: If traditional lenders deny you, these may approve—but watch for high APRs.

4. Consider a Co-Signer

A co-signer with good credit can help you qualify for better terms. Just remember: if you default, their credit takes a hit too.

5. Choose the Right Car

Lenders prefer financing reliable, moderately priced vehicles. Avoid:
- Very old cars (over 10 years)
- High-mileage cars (over 100,000 miles)
- Luxury brands (higher depreciation)

6. Negotiate the Loan Terms

Even with a 650 score, you can negotiate:
- Interest rate: Compare offers and ask lenders to match the lowest.
- Loan term: Shorter terms (36-48 months) mean less interest paid overall.

Pitfalls to Avoid

High-Interest Loans

Some lenders prey on fair-credit buyers with APRs as high as 15-20%. Always calculate the total cost before signing.

Extended Loan Terms

A 72- or 84-month loan lowers monthly payments but costs thousands more in interest. Stick to 60 months or less.

Skipping the Fine Print

Watch for prepayment penalties or mandatory add-ons (like GPS trackers) that inflate costs.

Alternative Options If You’re Denied

Lease-to-Own Programs

Some dealerships offer lease-to-own deals, though they often come with strict terms.

Buy Here, Pay Here Dealerships

These in-house financing options don’t require good credit but come with sky-high rates and risks.

Improve Your Credit First

If possible, take 3-6 months to:
- Pay down existing debt.
- Make all payments on time.
- Avoid new credit applications.

Even boosting your score to 680+ can unlock significantly better rates.

Final Thoughts

While a 650 credit score isn’t ideal, it’s far from a roadblock. With careful planning, research, and negotiation, you can drive off in a reliable car without overpaying. Stay patient, explore all options, and don’t settle for predatory terms—your financial future is worth the effort.