Used Car Loans

A car is probably the second or third most expensive thing you ever get (depending on the education, since a house is the major expense in your lifetime), and with that big an investment you need to take care of a lot of factors. Even if you save money for quite some time, purchasing a used car can still be very expensive and requiring a little extra. To help cover these areas, all credit companies, bank or other financing industries have developed a loaning system for the individual so that the person in need can purchase his car.

Basically what is a loan, in company terms? A loan is an amount of money that are given to the customer by the financing company for the purpose of buying something (a car in our case). The company verifies your credit score and if it is clean you will be eligible for that loan. So when you go sign a contract for a loan you will have to pay a monthly fee to cover the amount that you have borrowed and something a little extra they call “interest”.

So if you understand all the terms let’s see how do you get a loan.

First step is: knowing your credit situation. Like I said, a clean credit will make you eligible for a loan, a less than clean credit history will classify you as a “bad credit” loaner and it will be much harder for you to obtain the loan. You need to head for Equifax or TransUnion and acquire a credit report which tells you where you stand.

Step 2: is disputing any unsolved problems with your credit. Mistakes or missed terms may affect your credit score dramatically, dropping your chances to get the money you need. Provide the agency that reported you with the necessary paperwork to see the problem done so that any “black spots” are removed from your credit history.

Step 3 is reassurance. Get the papers you need to show the financing company that you have a steady job and home. You can present a stub or a letter from your boss. Additional information regarding your checking account will be required.

Be prepared to pay a little more in interest when targeting a used car loan. Most lending companies will charge a more for a used car (usually 2%) than for a new one. so technically the newer the car is the lesser you’ll have to pay in interest.

Be careful when you’re choosing your car. Many banks will refuse loans if the car is over 5 years old. This represents a liability for them and not enough to be used as solid collateral in case of payment problems. Therefore those are considered liabilities.

Step 4: preparation. Do a little research and try to focus on financing companies that specialize in used car loans. For example a company like Capital One Auto will offer loans for used cars that are purchased from dealerships. Other institutions like First Again will offer loaning options for those who decide to head for private parties.

Also do your math thoroughly. Calculate the interest you will have to pay BEFORE you choose the loan’s length. It may seem really easy to go for a long term loan cause the monthly fee is so and affordable, but if you take the time and calculate how much are you going to pay in the long run, you will realize that they’ll become rich at your expense. Try as much as possible to make 3 years long loans.

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Post tags: Tags: car loans, used car, used car credit, Used Car Loans