Securing an auto loan with a credit score of 500 can be challenging but not impossible. While many traditional lenders may shy away from borrowers with low credit scores, several financial institutions and strategies exist that can facilitate the approval process. Understanding the nuances of credit scores, lending criteria, and alternative financing options is crucial for individuals aiming to purchase a vehicle despite their less-than-ideal credit history. This comprehensive guide will delve into the factors influencing auto loan approvals, the types of lenders available, and practical steps to enhance your chances of getting approved.

Can I get approved for an auto loan with a 500 credit score?

Yes, it is possible to get approved for an auto loan with a credit score of 500, but options may be limited and interest rates will likely be higher. Specialized lenders such as subprime lenders or “buy here, pay here” dealerships often cater to borrowers with low credit scores.

Understanding Credit Scores

Credit scores are numerical representations of a borrower’s creditworthiness based on their credit history. Ranging typically from 300 to 850, these scores assess payment history, credit utilization, length of credit history, types of credit in use, and new credit inquiries. A score of 500 falls into the “poor” credit category, indicating that the borrower has a history of missed payments or high debt levels, making lenders hesitant to approve loans.

What Does a 500 Credit Score Mean?

A credit score of 500 signifies that the borrower is at high risk for default. This score often results from late payments, high credit utilization, or bankruptcies. Lenders view such scores as indicative of potential financial instability, which is why they may impose stricter approval criteria, higher interest rates, or larger down payments on auto loans.

Auto Loan Approval Basics

Auto loan approval is influenced by several key factors, including credit history, income level, and loan amount requested. Lenders typically evaluate your ability to repay the loan by assessing your debt-to-income ratio and employment stability. Understanding these elements can help borrowers prepare effectively for an auto loan application.

What factors influence auto loan approval?

Several factors play a critical role in determining auto loan approval, including credit score, debt-to-income ratio, and employment history. Each of these elements offers lenders insight into a borrower’s financial reliability and ability to repay the loan.

Credit Score

The credit score is one of the most significant factors influencing auto loan approval. Lenders use this score to gauge the likelihood that a borrower will repay the loan. A higher score often leads to better terms and conditions, while lower scores like 500 can result in higher interest rates or even denial of the application.

Debt-to-Income Ratio

The debt-to-income (DTI) ratio compares a borrower’s total monthly debt payments to their gross monthly income. A lower DTI indicates that a borrower has a good balance between debt and income, which is favorable for loan approval. Lenders typically prefer a DTI of 36% or lower, which can be challenging for those with lower credit scores.

Employment History

Stable employment history is essential for lenders assessing a borrower’s reliability. A consistent job demonstrates financial stability and the ability to make regular payments. Lenders usually require proof of income to ensure that the borrower can afford the loan, making employment history a crucial factor in the approval process.

How does my credit score affect my auto loan interest rates?

Your credit score directly impacts the interest rates offered on auto loans. Generally, borrowers with lower scores face significantly higher interest rates, which can lead to increased overall loan costs and monthly payments.

Interest Rate Ranges for Different Credit Scores

Interest rates vary dramatically based on credit scores. For instance, borrowers with scores above 700 might secure rates as low as 3%, while those with scores around 500 can expect rates of 10% or more. This disparity highlights the financial repercussions of having a low credit score when seeking an auto loan.

Impact of Low Credit Scores on Rates

A low credit score not only increases interest rates but can also limit loan options. Lenders may view low scores as a higher risk, leading to more stringent terms. This can result in higher monthly payments, making it essential for borrowers to evaluate the total cost of the loan.

Negotiating Interest Rates

Negotiating interest rates is often possible, even for borrowers with low credit scores. Presenting a stable income, a larger down payment, or a co-signer can strengthen your bargaining position. It’s advisable to shop around and compare offers from multiple lenders to find the best possible rate.

What are the chances of getting approved with a 500 credit score?

The chances of getting approved for an auto loan with a 500 credit score are relatively low, but not impossible. Factors such as the lender’s specific criteria, the borrower’s financial situation, and the vehicle being financed play significant roles in the approval process.

Statistical Approval Rates

Statistical data indicates that borrowers with credit scores below 580 face a higher likelihood of loan denial. However, many lenders exist that specialize in subprime lending, increasing the chances of approval for those with lower scores. Understanding these statistics can help borrowers set realistic expectations.

Lenders’ Perspectives

Lenders typically categorize borrowers into tiers based on credit scores. Those with a score of 500 fall into the subprime category, where lenders may require additional documentation or collateral. Understanding lender perspectives can aid borrowers in presenting themselves as less risky candidates.

Alternative Loan Options

Borrowers with a 500 credit score may need to consider alternative loan options, such as subprime lenders or “buy here, pay here” dealerships. While these options can provide access to financing, they often come with higher interest rates and less favorable terms.

What types of lenders consider low credit scores?

Several types of lenders are willing to consider borrowers with low credit scores, including subprime lenders, credit unions, and specialized dealerships. Each of these options has unique features and potential drawbacks.

Subprime Lenders

Subprime lenders focus specifically on borrowers with poor credit. They often offer loans with higher interest rates but can provide access to financing for those who would otherwise be denied. It’s crucial for borrowers to research these lenders carefully to understand the terms and conditions.

Credit Unions

Credit unions are member-owned financial institutions that may offer more favorable terms for low credit borrowers compared to traditional banks. They often have lower interest rates and may be more willing to work with individuals to find suitable loan options, making them a viable choice for borrowers with low credit scores.

Buy Here Pay Here Dealerships

Buy here pay here dealerships finance vehicle purchases directly, often catering to borrowers with poor credit. While they may offer easier approval, the interest rates can be significantly higher, and the overall terms may be less favorable. Borrowers should carefully evaluate these options and consider the total loan costs.

What documents do I need to apply for an auto loan?

When applying for an auto loan, specific documents are typically required to verify income, identity, and credit history. Preparing these documents in advance can streamline the application process and improve your chances of approval.

Proof of Income

Proof of income is essential for demonstrating that you can afford the loan payments. This may include recent pay stubs, tax returns, or bank statements. Lenders use this information to assess your financial stability and ability to make regular payments on the loan.

Identification

Proper identification is required to verify your identity and legal status. Typically, a government-issued ID, such as a driver’s license or passport, is necessary. Providing accurate identification helps prevent fraud and expedites the loan approval process.

Credit History

While lenders will access your credit history, having a personal copy on hand can help you understand your financial standing. This allows you to address potential issues before applying. Understanding your credit history can empower you to negotiate better terms and conditions.

Can I improve my chances of approval with a co-signer?

Yes, having a co-signer can significantly improve your chances of auto loan approval. A co-signer with a higher credit score provides additional assurance to the lender, potentially leading to better loan terms.

Benefits of a Co-signer

A co-signer enhances your application by adding their creditworthiness to your loan request. This can lead to lower interest rates and increased loan amounts, making it easier to secure financing. Additionally, a co-signer can help you establish credit if the loan is successfully repaid.

Risks Involved

While having a co-signer can benefit you, it also carries risks. If you fail to make payments, your co-signer’s credit will be negatively affected. This can strain personal relationships and lead to financial repercussions for both parties involved, making it essential to communicate effectively before entering such an agreement.

Finding a Suitable Co-signer

Choosing a suitable co-signer is crucial. Ideal candidates include family members or close friends with strong credit histories. It’s essential to ensure that your co-signer understands the risks involved and is fully committed to the responsibility of the loan.

How can I prepare before applying for an auto loan?

Preparation is key to increasing your chances of loan approval. Steps such as checking your credit report, calculating your budget, and researching lenders can significantly enhance your application process.

Checking My Credit Report

Reviewing your credit report before applying for a loan is essential. This allows you to identify any inaccuracies or issues that may impact your score. By addressing these problems, you can enhance your chances of securing a loan with better terms.

Calculating My Budget

Understanding your budget is crucial for determining how much you can afford to borrow. This includes assessing your monthly income, expenses, and existing debts. A clear budget helps you avoid overextending yourself financially and ensures you can comfortably manage your loan payments.

Researching Lenders

Researching various lenders is essential to find the most favorable terms. Compare interest rates, loan amounts, and repayment options from multiple sources. Reading reviews and customer feedback can also provide insights into the lender’s reputation and customer service quality.

What alternatives can I consider if I can’t get approved?

If you cannot secure an auto loan due to a low credit score, several alternatives exist. Options such as secured loans, buy here pay here dealerships, and personal loans can provide feasible financing paths.

Secured Loans

Secured loans require collateral, such as a vehicle or savings account, which can reduce the lender’s risk. This makes it easier for borrowers with low credit scores to qualify. However, borrowers must be cautious, as failing to repay the loan can result in losing the collateral.

Buy Here Pay Here

Buy here pay here dealerships offer direct financing to consumers with poor credit scores. While these options may provide immediate access to a vehicle, they often come with high-interest rates and limited financing options. Careful consideration is necessary to evaluate the long-term costs associated with these loans.

Personal Loans

Personal loans from less traditional lenders or peer-to-peer lending platforms may be available to borrowers with low credit scores. However, interest rates can still be relatively high. It’s important to compare offers and understand the total repayment obligations associated with these loans.

What are the risks of getting an auto loan with a low credit score?

Obtaining an auto loan with a low credit score, such as 500, carries several risks. These include higher interest rates, potential for repossession, and negative impacts on future credit opportunities.

Higher Interest Rates

One of the most significant risks is the likelihood of receiving high-interest rates. Borrowers with low credit scores may face rates significantly above the market average, increasing the overall cost of the loan and monthly payments. This scenario can strain finances and lead to potential default.

Potential for Repossession

Borrowers with low credit scores may also face a higher risk of repossession. If loan payments are missed, lenders can repossess the vehicle, leaving the borrower without transportation and damaging their credit further. Understanding this risk is essential for responsible borrowing.

Impact on Future Credit

Taking on a high-cost auto loan can negatively impact future credit opportunities. Increased debt levels may deter lenders from approving future loans or credit lines, limiting financial flexibility. Maintaining good payment history on any current loans is essential to mitigate these effects.

Is it better to wait to improve my credit score?

In many cases, waiting to improve your credit score before applying for an auto loan can be beneficial. A higher credit score often leads to more favorable loan terms and lower interest rates, ultimately saving you money.

Timeframe for Credit Improvement

Improving your credit score can take time, but even small actions can lead to significant changes. Strategies such as paying down debts, making payments on time, and disputing inaccuracies can gradually boost your score. Understanding this timeline is crucial for planning your vehicle purchase.

Potential Savings on Interest

Waiting to improve your credit score can lead to substantial savings on interest payments. Borrowers with higher scores can secure lower rates, which translates to reduced overall loan costs. This can make the difference between an affordable loan and a financial burden.

When to Consider Waiting

Consider waiting if your credit score is significantly below average or if you are close to achieving a better score through current financial behaviors. Assess your situation and determine if a waiting period may yield better financing options for your future vehicle purchase.

Can I refinance my auto loan later if my credit improves?

Yes, refinancing your auto loan later is possible if your credit score improves. This can lead to better interest rates and reduced monthly payments, making it a viable option for borrowers who initially secured loans with low credit scores.

Refinancing Basics

Refinancing involves replacing your existing auto loan with a new one, ideally at a lower interest rate. This process can result in lower monthly payments and overall savings. Understanding the refinancing process and requirements is essential for maximizing its benefits.

When to Refinance

Consider refinancing when your credit score has improved significantly or if market interest rates have dropped. Additionally, if your financial situation has changed positively, such as an increase in income, refinancing may be a smart choice to lower your loan costs.

Potential Benefits

The potential benefits of refinancing include reduced monthly payments, lower interest rates, and the opportunity to pay off the loan faster. It’s essential to calculate the costs associated with refinancing to ensure that the benefits outweigh the expenses.

What should I avoid when applying for an auto loan?

When applying for an auto loan, certain pitfalls should be avoided to ensure a smoother application process. Common mistakes include engaging with predatory lenders, overextending your budget, and failing to read the fine print.

Common Pitfalls

Common pitfalls include rushing into a loan agreement without adequate research or understanding the terms. Borrowers should take the time to compare offers and evaluate their financial situations thoroughly. Avoiding hasty decisions can lead to more favorable loan outcomes.

Predatory Lenders

Be cautious of predatory lenders who may target individuals with low credit scores. These lenders often impose excessively high interest rates and hidden fees that can trap borrowers in a cycle of debt. Researching lenders thoroughly and reading reviews can help identify reputable institutions.

Overextending My Budget

Overextending your budget can lead to financial strain and the inability to make loan payments. It’s critical to assess your financial capabilities honestly and choose a loan amount that fits comfortably within your budget. This approach helps prevent future financial difficulties.

Are there specific lenders that cater to bad credit borrowers?

Yes, several lenders specialize in catering to borrowers with bad credit. Researching these lenders can help identify which institutions offer the best terms and conditions tailored to your financial situation.

Researching Bad Credit Lenders

Researching lenders that focus on bad credit can provide insights into your options. Online reviews, recommendations, and direct inquiries can help assess which lenders are reputable and offer favorable terms. This research is vital for making informed borrowing decisions.

Comparison of Offers

Comparing offers from different lenders is crucial to securing the best possible loan terms. Pay attention to interest rates, repayment periods, and additional fees. A thorough comparison can help identify the most affordable option for financing your vehicle.

Reading Reviews

Reading customer reviews and ratings can give insight into lenders’ practices. Look for feedback regarding customer service, transparency, and overall satisfaction. This information can help ensure that you choose a reliable lender for your auto loan.

How can I build my credit score before applying?

Building your credit score before applying for an auto loan is crucial for securing better terms. Strategies such as paying down existing debt, making timely payments, and using credit responsibly can help enhance your creditworthiness.

Paying Down Existing Debt

Paying down existing debt can significantly improve your credit utilization ratio, a key factor in credit scoring. Reducing balances on credit cards and loans can lead to a higher credit score. This proactive approach can enhance your chances of loan approval and better terms.

Making Payments on Time

Timely payments are essential for maintaining a good credit score. Setting up automatic payments or reminders can help ensure that all bills are paid on time, avoiding late fees and negative impacts on your credit history. Consistency in payment behavior is crucial for credit improvement.

Using Credit Responsibly

Using credit responsibly involves staying within your credit limits and avoiding excessive borrowing. Keeping credit accounts open but not overutilized can positively influence your credit score. Demonstrating responsible credit behavior can enhance your overall credit profile over time.

What role does employment history play in loan approval?

Employment history plays a significant role in loan approval as it reflects financial stability and the ability to repay loans. Lenders often require proof of steady employment to assess risk levels associated with granting loans.

Stability vs. Temporary Work

Lenders often favor applicants with stable employment history over those with temporary or inconsistent work. A stable job suggests reliable income, which is crucial for loan repayment. Understanding this preference can guide job seekers in presenting their employment history to lenders effectively.

Income Verification

Income verification is a critical step in the loan approval process. Lenders typically require documentation such as pay stubs or tax returns to confirm income stability. This verification process helps lenders assess the borrower’s ability to make timely payments on the loan.

Lender Requirements

Lender requirements for employment history may vary, but most prefer applicants with at least two years of steady employment in the same job or industry. Meeting these criteria can significantly enhance your chances of loan approval, making it essential to be prepared with necessary documentation.

What is the average loan term for someone with a 500 credit score?

The average loan term for borrowers with a 500 credit score can range from 36 to 72 months, depending on the lender and the loan amount. Longer terms may be offered to reduce monthly payments, but they can also lead to higher total interest costs.

Loan Term Lengths

Loan terms typically range from 36 to 72 months, with longer terms often resulting in lower monthly payments. However, borrowers should be cautious, as longer terms can lead to higher overall interest payments. Evaluating the trade-offs between term length and affordability is essential.

Impact on Monthly Payments

Longer loan terms can lower monthly payments, making loans more manageable for borrowers with low credit scores. However, this can result in paying more interest over time. Borrowers must carefully consider their financial situations and choose terms that balance affordability with total cost.

Choosing the Right Term

Choosing the right loan term involves weighing monthly payment comfort against the total cost of the loan. Understanding personal financial circumstances and future income projections can guide borrowers in selecting the most beneficial loan term for their needs.

How much can I expect to borrow with a 500 credit score?

With a 500 credit score, borrowers can typically expect to borrow between $10,000 and $20,000 for an auto loan, depending on the lender and specific circumstances. However, the total amount may be influenced by other factors like income and down payment.

Typical Loan Amounts

Typical loan amounts for borrowers with low credit scores may vary based on lender policies and vehicle value. Generally, loans tend to be lower to mitigate risk, with many lenders capping amounts around $10,000 to $20,000 for those with a credit score of 500.

Factors Affecting Loan Amount

Factors influencing how much you can borrow include income level, existing debts, and the vehicle’s value. Lenders assess these factors to determine a borrower’s ability to repay the loan. A comprehensive understanding of your financial profile can help you maximize your borrowing potential.

Down Payment Requirements

Down payment requirements may be higher for borrowers with low credit scores. Lenders may require a down payment of 20% or more to offset the perceived risk. A larger down payment can also lower monthly payments and overall loan costs, making it a strategic consideration for borrowers.

What are the hidden costs of auto loans?

Hidden costs of auto loans can include fees, insurance, and maintenance expenses. Being aware of these costs is essential for budgeting and financial planning when purchasing a vehicle.

Fees and Charges

Auto loans often come with various fees, including origination fees, processing fees, and late payment charges. Understanding these potential costs upfront can help borrowers avoid surprises and manage their budgets more effectively.

Insurance Costs

Insurance costs should also be factored into the overall expense of owning a vehicle. Lenders may require comprehensive coverage, which can be more expensive. Evaluating insurance options and understanding coverage requirements can aid in budgeting accurately.

Maintenance Expenses

Maintenance expenses are ongoing costs that can impact the total cost of ownership. Regular maintenance, repairs, and unexpected issues can add to the financial burden of owning a vehicle. Budgeting for these costs is vital for responsible financial planning.

Do I need a down payment for an auto loan?

A down payment for an auto loan is often required, especially for borrowers with low credit scores. A down payment can reduce the loan amount and lower monthly payments, making it an essential consideration for financing.

Importance of Down Payments

Down payments are crucial as they demonstrate commitment to the loan and reduce the lender’s risk. By putting money down upfront, borrowers can secure better loan terms and lower interest rates. A substantial down payment can also enhance approval chances for those with poor credit.

Typical Down Payment Amounts

Typical down payment amounts for borrowers with low credit scores can range from 10% to 20% of the vehicle’s price. Higher down payments may be required depending on the lender’s policies and the borrower’s creditworthiness. Understanding these expectations is essential for financial planning.

Negotiating Down Payments

Borrowers may be able to negotiate down payment terms with lenders. Presenting a strong financial profile or offering a larger down payment can lead to better loan conditions. Effective negotiation can yield more favorable borrowing terms, making it a valuable strategy.

Can I negotiate the terms of my auto loan?

Yes, negotiating the terms of your auto loan is possible, and it can lead to better conditions. Factors such as interest rates, down payments, and loan terms can often be discussed with lenders.

What Can Be Negotiated?

Key terms that can be negotiated include interest rates, loan amounts, and down payments. Borrowers should be prepared to discuss their financial situations and present offers from other lenders to strengthen their negotiating position. Understanding the terms can empower borrowers to advocate for better conditions.

Tips for Negotiation

Effective negotiation requires preparation and confidence. Researching competitive rates and understanding your financial limits can provide leverage in discussions. Additionally, being polite yet assertive can foster a productive dialogue with lenders, increasing the likelihood of a favorable outcome.

When to Walk Away

Knowing when to walk away from a loan offer is essential. If the terms are unfavorable or if the lender seems untrustworthy, it may be better to seek alternatives. Trust your instincts and prioritize your financial well-being when making borrowing decisions.

What impact does the economy have on auto loan approvals?

The economy significantly impacts auto loan approvals, influencing interest rates, lender behaviors, and overall financing availability. Economic downturns can lead to stricter lending requirements and higher interest rates for borrowers.

Economic Trends

Economic trends, such as unemployment rates and inflation, can affect lending practices. During economic downturns, lenders may tighten their criteria, making it more challenging for borrowers with low credit scores to secure loans. Understanding these trends can help borrowers navigate the auto loan landscape effectively.

Interest Rate Fluctuations

Interest rates are closely tied to the overall economic climate. When the economy is strong, interest rates may decrease, benefiting borrowers. Conversely, during economic instability, rates can rise, leading to higher borrowing costs. Staying informed about economic conditions can help borrowers time their applications strategically.

Lender Behavior in Economic Downturns

Lender behavior often shifts during economic downturns, with many becoming more cautious in their lending practices. This can lead to stricter qualifications and higher rates for borrowers with low credit scores. Understanding lender behavior can help borrowers adjust their expectations and strategies accordingly.

How can I leverage online tools to find the best auto loans?

Online tools can be invaluable for finding the best auto loans. Resources such as loan comparison websites, online calculators, and pre-approval tools offer insights into loan options and help borrowers make informed decisions.

Loan Comparison Websites

Loan comparison websites allow borrowers to easily compare interest rates and terms from various lenders. These platforms streamline the research process and provide transparency in available options. Using these tools can help borrowers identify the most favorable loans for their financial situations.

Online Calculators

Online calculators can help borrowers estimate monthly payments and assess the total cost of a loan. By inputting different loan amounts, interest rates, and terms, borrowers can determine what fits within their budget. These calculations are essential for responsible financial planning.

Pre-approval Tools

Pre-approval tools allow borrowers to gauge their eligibility for loans before formally applying. This process can provide insights into potential interest rates and loan amounts, enabling borrowers to make informed decisions. Utilizing these tools can enhance the overall borrowing experience.

What are the signs of a reputable lender?

Identifying reputable lenders is crucial for securing favorable loan terms. Key signs include accreditations, customer reviews, and transparent terms and conditions.

Accreditations and Ratings

Reputable lenders often hold accreditations from recognized financial institutions and organizations. Checking these credentials can provide assurance of the lender’s legitimacy and trustworthiness. Additionally, industry ratings can indicate a lender’s reliability and customer satisfaction.

Customer Reviews

Customer reviews offer valuable insights into the experiences of previous borrowers. Reading both positive and negative feedback can help gauge a lender’s service quality and practices. Look for consistent patterns in reviews to make informed decisions about potential lenders.

Transparent Terms

Reputable lenders provide clear and transparent terms and conditions. Borrowers should carefully review loan agreements, ensuring they understand all fees, interest rates, and repayment terms. Transparency is a key characteristic of trustworthy lenders, making it essential to look for this quality.

Are there any government programs for low credit borrowers?

Yes, several government programs exist that aim to assist low credit borrowers in securing auto loans. These programs may offer lower interest rates or down payment assistance, making vehicle ownership more accessible.

State Assistance Programs

Some states offer assistance programs designed for low-income individuals, which may include auto loan support. These programs can vary significantly, so researching available options in your state is crucial for identifying potential benefits.

Federal Programs

Federal programs aimed at helping low-income individuals often include initiatives that support vehicle financing. These programs may provide financial assistance or resources to ensure that individuals can access reliable transportation. Understanding federal offerings can help borrowers take advantage of available support.

Eligibility Requirements

Eligibility requirements for government programs can vary widely based on location and specific initiatives. Potential borrowers should carefully review these requirements to determine their eligibility and gather necessary documentation. Meeting these criteria is essential for accessing government-supported financing options.

How can I understand the loan terms before signing?

Understanding loan terms before signing is critical to ensuring that you are making a well-informed decision. Key strategies include reading the fine print, familiarizing yourself with key terminology, and asking questions to clarify any uncertainties.

Reading the Fine Print

Reading the fine print is essential for uncovering hidden fees, penalties, and specific conditions tied to the loan. Borrowers should take the time to carefully review all documentation and ensure they understand every aspect of the agreement before signing. This diligence can prevent misunderstandings and financial difficulties later on.

Key Terminology Explained

Familiarizing yourself with key loan terminology can demystify the lending process. Terms like principal, interest rate, and APR are fundamental to understanding how loans work. Taking the time to educate yourself on these concepts can empower you to make informed borrowing decisions.

Questions to Ask the Lender

Asking the lender specific questions about the loan terms can clarify any uncertainties. Inquire about fees, payment schedules, and penalties for late payments. Being proactive in seeking information ensures that you fully understand the loan agreement and can make informed choices.

Mini FAQ

Can I get approved for an auto loan with a 500 credit score? Yes, but options may be limited and interest rates higher.

What factors influence auto loan approval? Credit score, debt-to-income ratio, and employment history are key factors.

How does my credit score affect my auto loan interest rates? Lower credit scores typically lead to higher interest rates.

What types of lenders consider low credit scores? Subprime lenders, credit unions, and buy here pay here dealerships often consider low scores.

Do I need a down payment for an auto loan? Yes, a down payment is often required, especially for low credit scores.

Can I negotiate the terms of my auto loan? Yes, many terms can be negotiated, including interest rates and down payments.

What are the risks of getting an auto loan with a low credit score? Higher interest rates, potential repossession, and negative impacts on future credit are significant risks.