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Can You Get a Car Loan with Credit Card Debt?

Car Loan with Credit Card DebtThere is no simple answer to this question. In some cases, you can get a car loan with a balance on your credit card; however, in others you will not. The only way to give a true answer is to give you some background information first.

The Importance of Your Credit Utilization Ratio

When you apply for a loan of any type, potential lenders will send for you credit score. The most trusted source for that score is the Fair Issac Corporation or FICO. FICO builds credit scores by following a standard pattern. Thirty percent of that score is based on your credit utilization ratio. The lower your credit utilization ratio, the higher your score will be. So, if you have a credit limit of $5,000 on your credit card/s, and have a balance of $1,000 or less your score will be higher. If you have the same credit limit, but have a balance of $4,000, your score will be low. FICO raises your score as long as you have a utilization ratio under 30 percent in general. In the above scenario that would mean a balance of $1,500 or less at all times. The credit utilization ratio changes frequently. It is solely based on your balances the day your credit score is requested.

Considerations to Keep in Mind

The answer to “can I still get a car loan with a credit card balance,” is yes. You must control the balance on those cards, but yes you can get a car loan with a small credit card balance. But whether you get a loan is only part of the equation. Can you really afford the new loan, plus all of your current obligations? Have you thought about how a new car will affect your insurance rates? Take care to consider all of the costs of buying a new car before you move forward with financing.

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About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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