Tag Archives: auto
How to Buy Pre-owned Car With Bad Credit
If you need to buy a car though with low credit score, finding an affordable package can prove to be challenging. Many lenders charge high rates of interest on auto loans for people who have low credit score to make up for the risk. Hence, buying a used car instead of a completely new vehicle can allow you to save some cash. On this post, lets check out more tips on methods to find a reasonable low credit score auto loan deal.
Look at your latest credit history. Order the newest copy of your report so youll know exactly where you stand. Some car dealers may try to make the most of you by saying that you do have a lower score and you cannot qualify for a greater deal. Bringing a copy of your report when visiting a dealerships location will protect you from such lies.
Clean up your report. Errors or inaccurate information within your report can badly pull down your score. You can clean up these errors by sending a letter to the bureau that issued your report. It will take approximately 1 month for the credit bureaus investigation to complete if your dispute is found valid, the errors might be corrected and you will be sent an updated copy of your report. This can help increase your credit score. Keep in your mind that raising your score by just several points can certainly create a big difference along your car loans rate.
Seek help from an automobile expert. Buying a used car can allow you to save lots of money but you have the desire to make confident that you won’t need to spend the same cost on repairs and maintenance costs. Thus, its recommended that you hire a professional car mechanic or somebody who is aware of cars to make certain that the automobile you buy is still in fine shape.
Be prepared for repayment. Have you made the required intend to make certain you are able to keep with your monthly auto loan payments? You should make some adjustments on your monthly budget want to minimize your expenses. If you still have unpaid credit card balances, now is the perfect time that you can pay your charges in full, before getting a new repayment obligation.
Use your car loan to rebuild bad credit. There are lenders who are known for bad credit auto loans. These lenders are likely to extend financing even to people who have poor credit history or even a poor credit score. In fact, your credit background will still be evaluated but it is a smart idea to personally consult with a potential lender and explain the circumstances which lead you to poor credit. As an example, when you have lost a job because your company is downsizing or maybe you have get ill and unable to work in previous months, a lender may be able to supply you with a bad credit car loan with a lower rate despite your credit history.
How to Get Out of an Upside Down Auto Loan
Getting upside down on car loan, sometimes also referred as underwater on car loan means your loan exceeds the current value of your vehicle or in other words you owe more on the loan than you could expect to get by car sale or trade-in deal. As you can’t pay off the loan with the income from selling the car due to the negative equity in auto loan, so you’re stuck with the car and the loan payments.
Of course, nobody likes being upside down on their auto loan whereby the car you want to trade-in is worth $6K and you still owe $10k on it. Despite the fact, almost 40% of the Americans end up being upside down on their auto loans.
Following are the reasons which act against the people to gain equity out of their vehicle while turning them upside down on their loan. However, being upside down can only be problematic to those who are looking to trade-in their car while owing on auto loan.
>>Low down payment or no money down A lot of borrowers avoid making down payment thinking of saving their cash on hand, but it ultimately adds on the interest amount.
>>Longer term Getting a car loan for five years or more can also increase your chances of owe more in interest than you will on the car. Thus, even if your payment seems affordable, in the true sense you are paying a lot more in interest.
>>Rolling old car payment to new car loan Some people with an intention to get rid of this situation transfer their old car’s remaining balance into a new auto loan. And thus add extra debt on their new auto loan which makes them to increase their monthly payments while being upside down all over again.
>>Higher interest rate: While accepting vehicle loan, it may happen that you are forced to take a higher interest rate either due to bad credit or any other reason which leads to raise your payment to interest more than principle.
>>Paying high for car: This happens especially when you buy an automobile from a private seller without checking the blue book value, and end up paying more on your car. While also when you purchase a car you cannot afford.
How to get out of this situation?
Prepayment: Prepayment could be an excellent way to pay off the loan faster. However, you need to make sure that your current loan does not include any prepayment penalties that could restrict you from paying additional cash. Thus, you can make extra payments each month and can get rid from being upside down.
Refinancing upside down car loan: Car loan refinancing can also be a good option to lower the interest rates while redefining your loan terms such as shortening your term period which can help you from being upside down. However, sometimes lenders does not provide you traditional refinance car loan, in such a case you can opt for a home equity loan which is a type of secured loans and have comparatively lower rates. Getting this loan can help you to pay off your loan quickly without spending extra cash.
Avoiding the situation in future:
Making the down payment (at least 20%). Not having loan terms more than 5 years. Prefer buying a used car as new cars depreciate much faster. Keep your car loan payment limited to 20% of your income.