If you’ve just gotten a huge bonus or received a huge promotion at work, rewarding yourself with a new car isn’t a bad idea. After all, you did spend a huge amount of time and effort to achieve your career goals. Now go ahead and enjoy the Big Auto Loan Benefits for Good and Bad Credit.
Big Auto Loan Benefits for Good and Bad Credit
Here are some general benefits of purchasing a car using an auto loan whether on bad or good credit.
1. Enables you to afford various long-term debts
The average white or blue-collar employee has mortgages, student loans, and probably a few payday loans to pay off each month. In this case, it will take more than five years to save up for a new car. However, you still need to get to work on time as well as your family. Rather than embark on an uphill savings struggle, it’s easier to obtain either a bad or good credit auto loan.
2. Improves your credit rating significantly
An auto loan is a secured debt because you receive your car’s logbook after paying off all monthly installments in full. Each time you pay a monthly installment on time, your credit score improves slightly. When these small credit score improvements accumulate during the repayment period, you’ll notice a huge shift.
When you have a better credit score, you won’t struggle to get mortgages. In fact, you’ll get more affordable interest rates than before your auto loan. It’s also easier to apply for ordinary bank loans at friendly interest rates when your bank notices a tremendous improvement in your credit score.
3. Entitles you to auto loan refinancing
Life is unpredictable. Imagine your boss calling you to his office one morning to inform you that the company is implementing a 40 percent staff pay cut, in order to, cope with rising business costs. Since you have mortgages, outstanding student loans, and utilities to pay, the biggest concern is whether or not you can afford your auto loan monthly payments.
Fortunately, you can retain your motor vehicle by applying for car refinancing. This arrangement enables you to pay lower monthly installments over an extended repayment duration. Car refinancing can reduce each monthly installment by up to 30 percent.
What is a bad credit auto loan?
A bad credit auto loan is a secured debt advanced to car buyers with a credit score ranging between 300-640. Car dealerships and other creditors require buyers with poor credit scores to put down a cash deposit to qualify for bad credit auto loans. It can range from 20-40 percent of the car’s price.
To qualify, you need to provide copies of your current paycheck to prove that you have a source of income. If you run a business, your creditor will request bank statements for the past six months.
5 Benefits of getting a bad credit auto loan
1. It doesn’t lower your credit score
When you apply for a bad credit auto loan, the creditor performs a hard inquiry through various credit reference bureaus. Each inquiry only deducts five points from your credit score. When your creditor approves your loan, it appears on your credit report but you won’t suffer any additional loss.
2. Readily available
It’s no secret that a lot of working-class Americans have subprime and poor credit scores. The escalating costs of living and volatile interest rates have affected some people more severely than others. Especially single parent homes because there’s only one source of income.
Complete Auto Loans helps car buyers with both subprime and poor credit scores to obtain bad credit auto loans at affordable rates. If you don’t have enough cash to pay for your cash deposit, you can get a cosigner.
3. Relatively affordable interest rates
We cannot ignore the fact that creditors charge higher interest rates for bad credit loans than those obtained using credit scores above 720.
Informa, a U.S based group that focuses on business and financial news published a bad credit auto loan report in 2013. If your credit score is 500 and you got a bad credit auto loan worth $20,000 with a repayment period of 36 months, you’ll pay an APR of 16.96%. When you break it down into installments, you’ll pay at least $713 dollars a month.
This APR is similar to what credit cards charge customers. If you’ve just finished paying off your mortgage and your credit score improves to 620, you can get a bad credit auto loan that only charges 10.4 % APR.
4. Short repayment period
There’s usually an unsettling feeling that comes with long-term debts. That’s why you feel some relief after paying off your monthly mortgage installment. However, when the next payment date draws closer, anxiety tends to increase.
If you hate staying in debt for too long, you can always get a bad credit auto loan with a 24-month repayment period. If you need more time, you can apply for a 36-month repayment period.
5 benefits of getting a good credit auto loan
1. High approval rate
A credit score is an indicator of how well you pay your debts. When your credit score is above 720, it’s a credible indicator that your past creditors enjoyed doing business with you. Perhaps after paying off your mortgage, you noticed the number of increasing phone calls from your bank persuading you to apply for an auto loan. That’s because your credit score shot up after you finished paying your mortgage on time.
2. Friendly interest rates
Let’s go back to Informa’s 2013 auto loan report. According to this research, potential buyers with credit scores ranging from 690-719 pay an APR of 4.8 percent for a $20,000 loan over a repayment period of 36 months.
If you have a credit score of 800, guess what? Your APR will only be 3.4 %. At such low rates, you can purchase a bigger home without worrying about auto loan payments.
3. Access to brand new cars
Since you have an impressive credit score, you have the option of purchasing a brand new or used car using your auto loan. People with subprime and bad credit usually settle for second-hand cars. When you purchase a brand new car, you get value for money. Purchasing a second-hand car will force you to visit the mechanic in order to replace worn out parts.
4. Increased leverage compared to bad credit auto loans
When you have an excellent credit score and a decent income, you can get a recently launched SUV or modern family saloon car through leverage. Car dealerships allow customers to pay cash deposits when purchasing brand new cars using auto loans.
Let’s assume you wanted a BMW X3 worth $40,000 but fortunately, you come across a new BMW X5. The dealer informs you that it costs $60,000. If you use a little negotiation, you can convince the car dealership to take a 30 % percent deposit and accept your auto loan. Why? Because your excellent credit score assures the car dealership that you’ll pay the auto loan on time.
5. No need for cosigners
Car buyers with poor credit scores sometimes have to present cosigners when applying for auto loans. That’s because they pose a great risk to the creditor. However, car buyers with credit scores above 720 don’t have to pay cash deposits upfront or show up with cosigners.
Are you ready to enjoy the Big Auto Loan Benefits for Good and Bad Credit?
Now that you know the advantages of bad and good credit auto loans, take the first step to owning a car by downloading your credit report. If you’re worried about your credit score, Complete Auto Loans will help you get an affordable bad credit auto loan.