If sticker prices shock you, just wait until you see the interest rates...

Answer:

For a new car: 13.08%
For a used car: 19.38%

Questions:

1. Give one example of an action that can cause a borrower to have “bad credit?"
2. How does the interest rate affect the monthly payment on a car loan? Explain.
3. Assume a borrower with bad credit took out a $20,000 car loan. Estimate what the total cost of the loan would be for a 60-month loan. 
   • If you want to know the answer, here's an auto loan calculator. 

Here are the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (Experian):

"You can get a car loan with bad credit, but you may have fewer options and end up paying more interest and fees than someone with a higher credit score.

If you have a low credit score, consider whether buying a car right now makes sense or if waiting to improve your credit is a better option. If you need to buy a car urgently, here are a few steps you can take to prepare and potentially improve your options:

• Check your credit. Although you likely won't know which credit score the lender will use, you can still check one of your credit scores and review your credit report. You might find that there are ways to quickly improve your credit score before applying.
• Get prequalified. Some auto lenders offer online prequalification, which can show you estimated loan offers using a soft credit inquiry. This process doesn't affect your credit scores. Try to get offers from several types of lenders so you can compare terms.
• Increase your down payment. A larger down payment might help you qualify for a lower interest rate. Even if it doesn't, borrowing less money will lead to paying less interest.
• Ask someone to cosign. You could see if a close friend or family member who has good credit is willing to cosign the loan. It could help you qualify and get a better offer, but they'll also be legally liable for the debt and the loan can affect their credit."

About the Author

Kathryn Dawson

Kathryn (she/her) is excited to join the NGPF team after 9 years of experience in education as a mentor, tutor, and special education teacher. She is a graduate of Cornell University with a degree in policy analysis and management and has a master's degree in education from Brooklyn College. Kathryn is looking forward to bringing her passion for accessibility and educational justice into curriculum design at NGPF. During her free time, Kathryn loves embarking on cooking projects, walking around her Seattle neighborhood with her dog, or lounging in a hammock with a book.

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