Are you looking for a new, used car? Here are some ways used car loans can help you out in the buying process and make it easier on you.
Keyword(s): used car loans
If you have enough money to buy a used car without a loan, is there any reason to consider taking on debt? The answer is yes if you’re worried about your credit score.
Used car loans are a fantastic way to bring your credit score up. If you’re struggling to get a good rate on personal loans due to low credit, an auto loan might be your best option.
1. The Credit Mix
If your credit is lacking and you need to buy a used car, you’re in a much better position than you might think. Taking out a loan on a used car is one of the ways you can bolster your credit rating.
To have the best FICO credit score possible, you need to have a healthy mix of credit. In other words, you have to have multiple sources of credit instead of just one or two.
If you pay your bills on time and have a home loan, two credit cars, and a car loan, your credit rating is destined to go up.
2. Secured Debt
If you have bad credit, you’ll find that you’ll end up having to pay a far higher interest rate on your loans than someone with good credit. Sometimes, this means you can’t make that big purchase at all.
If you need a car and want to raise your credit rating, used car loans can be your answer. The interest rate will be lower than that of personal loans.
Your interest rate will be lower because the lender has collateral. If you don’t pay your loan, they can take your car. This incentive means lenders won’t consider you a high a risk borrower.
3. They’re Fixed-Rate
Unlike personal loans or mortgages, used car loans are fixed-rate. This means that they won’t fluctuate as the market shifts.
If you need to borrow money for a home with bad credit, you could be forced into choosing an adjustable rate. The monthly payments will be lower than fixed-rate loans, in the beginning, but adjustable-rate loans are subject to change.
The CBO predicts that interest rates are going up, so you’ll likely end up paying more money.
Fixed rate loans are easier to manage, and give you the opportunity to raise your credit rating.
4. You Can Reduce Your Monthly Payments
The best thing about a used car loan is that you can significantly lower the monthly payment with a sizeable down payment. If you have plenty of funds, but your credit is lacking, you can make a high down payment and pay less over the course of the loan.
Once you’ve paid your monthly payment for a couple of years, you’ll be in a position to refinance your loan. Your credit will improve, and you can get a better rate by refinancing.
After you refinance, you can pay your loan quicker and get better credit over time. From there, you can take out personal loans without having to pay a ridiculously high-interest rate.
The Benefits of Used Car Loans
Used car loans are ideal for people with bad credit who need a car. If you have enough money for a large down payment, even better. You can take out a longer loan and still easily make the monthly payments without sweating.
Want some more tips on car loans? Take a look at our blog!