A blank check auto loan is when a bank offers you a loan to finance a car. The bank allows you to pick either a new or used car then they pay for it. It’s a different concept from typical car financing where either the credit lender or dealership offers you predetermined cars and loan limits.
1. What are the pros?
1. Greater freedom compared to typical car loans
Typical auto loans are restrictive in terms of choice and this brings about customer dissatisfaction. A blank check car financing allows you to own your dream car because you determine your own loan limit. So, you won’t have to settle for a used car.
2. Good interest rates
Banks only lend loans to people with good or excellent credit scores. These loans usually have friendly interest rates compared to car financing from third-party lenders.
3. No Hassles
You really won’t need to present any paperwork. Why? Because the bank already knows your credit score. If your employer sends the check directly to your bank, then you won’t need to present proof of income.
4. Refinancing is available and easy to get
Banks will allow you to refinance your loan when interest rates drop or when you encounter unexpected financial problems. You won’t pay any costly fees or experience a decline in your credit ratings.
5. Car dealerships feel safer doing business with you
Car dealerships feel safer selling to customers with blank check auto loans due to one reason; Approval from a highly accredited financial institution. That means less time spent processing your paperwork.
2. What are the disadvantages
1. Limited to buyers with good credit scores
Banks are wary of offering credit to borrowers with subprime and poor credit ratings. If your credit score isn’t good, then you’ll just have to seek another source of financing.
2. Limited to standard cars
The bank sets a limit on the value of a car that you can buy. It’s impossible to buy a car worth $150,000 when you earn $30,000 annually. In addition, you cannot use your blank check to purchase a car for your business.
3. High late payment penalties
Banks are usually stricter on monthly payments than car dealerships or third-party lenders. A slight delay attracts a costly fine and some banks use a daily rate.
3. Four tips on how to get a blank check auto loan
1. Maintain an excellent credit score
If you’re currently paying a secured loan, make sure you download your credit report frequently. Confirm that all your payments appear and the improvement in your credit ratings.
2. Prepare to pay a huge down payment
One way of convincing the bank is by offering to pay a large deposit for your car. Aim for at least 40-50% of your car’s price. Doing this shows that you have a high probability of making car payments on time.
Tip: Car Loan Calculator
3. Apply for a short repayment period
It’s advisable to choose a repayment period that’s below 36 months. Doing this enables you to lower the amount of interest attached to your auto loan. Plus, it improves your application because banks prefer debtors who pay debts within short periods.
4. Apply for a reasonable amount
Banks will look at your gross and net income to determine your credit limit. So, it’s advisable to consult first before applying for an amount that’s beyond your limit.
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4. Now you Know!
Blank check auto loans are great because first, you get to choose the car you want rather than settle for what your car dealership picks. You get value for money and feel good paying for a car you’ve dreamed to own.