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Car Loans
Car loans in general can be hard to understand if you have never purchased a car. This article will give you information on the 3 types of car loans including bad credit, no credit and good credit car loans.
Good Credit
Those customers with good credit can expect the easiest time finding financing for car loans. Interest rates are lowest for this group, as well as incentives coming easier. Those with good credit are seen as the lowest risk to lend to, and therefore are given opportunities to save money that other consumers are not given. With good credit, interest rates are as low as 5%, and incentives such as loan forgiveness, early payoff bonuses and shorter loan periods are seen. Most finance companies will have good credit consumers approved within an hour of application during normal business hours. It is important to know that many with good credit buy new cars, and the cost is higher for the vehicle, but the loan period is shorter.
Bad Credit Car Loans
Those customers with bad credit will have the hardest time finding financing for a vehicle. Auto loans are some of the easiest loans to obtain, but for those with bad credit, finding a company willing to extend credit is hard. Pulling a credit history will give the lenders the chance to see how you have previously paid on accounts. This helps them to decide if you are more likely to pay or not, and therefore their decision is based on this report. Checking your credit history from one of the major credit reporting agencies is imperative to deciding if you can be approved or not. Interest rates will be highest for those with bad credit, and auto loans in this category have been found as high as 29%. Even with bad credit, there are options and you are not required to take the first company that approves you. Shop around and look for lower interest car loans, or those that will take a cosigner to get better rates.
No Credit Car Loans
People with no credit are more or less in the same boat as those with bad credit: it is hard to find a company that will lend to you. This is due to the fact that the credit report is pulled as soon as you apply. The lenders for car loans look at this to see if you will be a high or low risk customer. Since there is no credit history to look at, the decision has to be made and assume that you are going to not be able to pay the loan back. Almost all companies require a cosigner for those with no credit history. This is to ensure that payments will be made, and that the loan is secure. Asking someone to cosign means that they will assume this debt if you are unable to pay it. Just because one person says no does not mean all people will, and you can always ask a parent or grandparent to cosign as long as they have good credit.