Reasons You Should Consider Getting a Car Loan and the Benefits of Owning a Car.
The following are some reasons you should consider getting a car loan:
· A car loan can help you save money in the long term. You may be able to get a lower interest rate than what is available on credit cards, which means you will end up paying less in interest over time.
· If you have bad credit or no credit at all, then it may be difficult for you to qualify for other types of loans and financing options that require collateral. A car loan does not require collateral and can give you access
What Types of Auto Loans Are Available?
Auto loans are a type of loan that can be used to purchase a car. The borrower can borrow anywhere from $5,000 - $500,000 for the purchase of the vehicle.There are different types of auto loans available and each one has its own set of features and benefits.
There are two main types of auto loans: secured and unsecured. Secured loans require collateral in order to receive funding. Unsecured loans do not require any collateral but have higher interest rates due to the lack of security for repayment.
What is Considered Good Credit When Applying for A Car Loan?
The best possible credit score is 1250. If you have a credit score of 800 or above, you will usually be approved for a car loan with the best rates. If your credit score is below 400, you may not be approved for a car loan at all as lenders systems have a cut off on the credit score will be.
What If You Have Bad Credit or No Credit at All?
If you have bad credit or no credit at all, there are still ways to get a car. You may be eligible for a loan with a high interest rate. The positive thing is if you make your repayments for 12 months with no dishonours, you can refinance to a cheaper rate as you will now have A- Rated Credit.
When it’s your first time applying for finance the lender may request a small deposit and cap the amount you can borrow, just to build your rating up.
What Determines What My Interest Rate Will Be?
There are many factors that come into play when trying to secure the best interest rate on your next car or personal loan. Below is a list of items that will help you get that low rate
· High Credit Score – Any credit score over800 will help, especially with our personal loan lenders.
· Mortgaged- Having a mortgage can help secure a lower rate
· Length of Residence/Employment – Lenders like to see stability in residence and employment, this can help boost your chances of getting a better rate.
· No missed payments on debts – A Rated Credit
· Great conduct on bank statements – No dishonours or missed direct debits
What Is a Balloon Payment?
You’ve probably heard the term Balloon or Residual Payment but what is it?
A balloon payment is a lump sum payable to the lender at the end of a loan term. In exchange for the lump sum, you are only required to pay interest on a portion of the principle, in turn lowering your monthly repayment.
How do they work? Let’s say you purchased a vehicle for $50,000 over a 5-year loan term at an interest rate of4.50%. The lender agrees on a balloon payment of 30% ($15,000).
Without a balloon payment your repayment would be $932.15 per month. With a 30% your repayment is reduced to $708.76 which is a saving of $223.39per month. Keep in mind although you’re saving on the monthly repayment, at the end of the 5-year period you will have a $15000 lump sum you will need to pay/refinance. If for whatever reason you cannot refinance the lump sum you will need to sell the vehicle to pay the funds back.
In conclusion, financing a car is a good idea if you don’t have the cash to buy the car outright.
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