- 1 should i get a car loan
- 2 Should I Refinance My Auto Loan? Find Out Online Now!
- 3 Can I Get a Car Loan If I Am Unemployed?
- 4 Credit Karma Answers: Should I Pay Cash for My Car or Finance?
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Should I Refinance My Auto Loan? Find Out Online Now!
If you are one of those who think, вЂњShould I refinance my car loan?вЂќ then you may take advantage of help provided by an expert to come out of your confusion. Car refinancing enables getting access to significantly reduced interest rates and hence, lowering of monthly instalments. But qualifying for low rates of interest could be extremely difficult if you have a bad credit history. To that effect, if you consult a specialist, who is well versed with the exact requirements of the process, you could be in a much better position to determine whether you can get your car refinanced. Carloansnomoneydown.com can assist you to find when should you refinance your car.
How Long Should I Wait To Refinance My Car Loan?
There are no specific set of rules which dictate as to how long you need to wait for refinancing your car. Nevertheless, your overall financial situation and prevailing interest rates could be a vital factor that might prompt you to apply for an auto loan refinance online regardless of whatever may be the existing status of your credit rating. In any case, the following parameters need to be considered if you are thinking of getting your vehicle refinanced to a lower rate of interest soon.
- A car refinance could be your best option if there has been a significant drop in auto loan interest rates.
- You can also consider applying for auto refinancing loan if you are underwater on your current car loan because of changed financial circumstances.
- Car loan refinancing attracts certain costs by way of fees or prepayment penalties. You must account for these for arriving at a decision.
- Some lenders may agree only for partial refinancing of car and in that case you need to be ready to bear any extra charges.
3 Things to Consider Before Refinancing Your Car
HereвЂ™s a list of 3 important things which need to be considered when you are considering refinancing your used car.
- Your credit score вЂ“ Your chances of getting qualified for low car refinance rate will depend on the exact status of your credit rating. Hence, if you have bad credit, it could be better if you take some urgent steps to improve it quickly. Besides, prior to applying for an auto refinancing loan, you must get the accuracy of your personal credit profile checked.
- Basic requirements вЂ“ Majority of the loan dealers will approve your application instantly if you have a stable, regular and sufficient amount of monthly income and your credit rating is above 600.
- Tip for saving money вЂ“ To save money and time during the effort to get your car refinanced, it could be advisable to search for specialized online lenders that offer lower interest rates as compared to what you could be paying currently.
I Have Bad Credit. When Should I Refinance My Car?
Your main objective is to get your monthly payments drastically reduced so that they are affordable and sustainable. However, as you are contemplating working with an altogether new lender, it could be crucial for you to make an informed decision.
Remember, your decision to apply for an auto loan refinance might be an absolute no-brainer if you can obtain lower interest rate with some other lender. In addition, you must not hesitate to go ahead with car financing if there is no loan pre-payment penalty clause in your existing loan.
How long should I wait to refinance my auto loan? Apply Now to Get Started with the process to drive a vehicle »
Can I Get a Car Loan If I Am Unemployed?
You can qualify for a car loan with other forms of income.
Your lack of a vehicle may hamper your chances of landing a job. At the same time, financing a car while unemployed can prove difficult since lenders are reluctant to extend credit to people who may lack resources to repay their debts. However, joblessness need not hinder your quest for a car if you can find another way to satisfy your lender's underwriting requirements.
While underwriting standards vary among lenders, most car loan companies base decisions on the so-called four C's of credit: collateral, credit, conditions and capacity. With a vehicle loan, your car serves as the collateral for the loan, which means the bank can repossess your vehicle if you default on the debt. You must find a car that's worth at least the amount you intend to borrow. You need to have a reasonably good credit score. The conditions are the terms of your loan, which include making sure you use the money for the purpose intended. Finally, you must prove that you have the capacity to repay the loan. Simply put, you must have enough disposable income to cover the car payment in addition to your other monthly expenses.
When you submit a loan application, lenders normally ask to see copies of your most recent pay stubs. However, you can qualify for a loan based on other types of income such as pensions, alimony or even investment earnings such as dividends and interest. If you are relying on non employment-related sources of income, you may have to provide your lender with copies of your tax returns and other supporting documentation such as dividend income statements and rental property lease agreements. Your lender uses this information to determine the percentage of your income that goes toward monthly debt payments. Lenders refer to the resulting calculation as your debt-to-income ratio. You cannot get a loan if your various income sources leave you with too little cash to cover the proposed loan alongside your existing obligations.
If you're unemployed and you don't have another source of income, you may still qualify for a car loan if you can find a willing co-signer. The co-signer must have enough income and good enough credit to meet your lender's underwriting standards. Some lenders allow you to have a nonowning co-signer on a car loan while others allow only signers whose name appears on the vehicle's title. Both you and the co-signer share the responsibility of repaying the loan. If you fail to repay the loan, then the past-due debt will hurt your credit score and the score of the co-signer.
Some lenders use alternative underwriting sources to help unemployed people qualify for loans. A firm may offer you a loan on the basis of your high credit score even if you lack a conventional income source. In some instances, firms qualify you on the basis of cash you have in savings and retirement accounts. Other lenders offer no-documentation loans, although not having to prove that you have income and not having any income are not the same thing. Interest rates on nonconventional loans are typically higher than on standard car loans because these programs are often financed by investment firms rather than retail banks. The investors assume a high degree of risk that is offset by the potential interest-generated earnings on the loan.
Credit Karma Answers: Should I Pay Cash for My Car or Finance?
Seven years ago, thanks to my parents, I graduated from college with no debt and a healthy love of saving money and living below my means.
Over the past year, I saved for a new-to-me car and did a lot of research to get a great deal. When I went to buy, I could have paid for the car outright but decided to finance in order to build credit. I was surprised to find out that though my credit score was an excellent 778, I was going to be slapped with a high interest rate. The salesman doing the financing said banks were not interested in lending to me because a) I was a first time borrower, b) it was a used car, and c) my credit history consisted only of credit cards.
Though I negotiated it down a bit, the salesman recommended making the monthly payments for a year and a half before paying off the loan. He said that then, I would establish credit and be a more desirable borrower the next time I buy a car, or when I’m ready to buy a house.
I have a few questions. First, was the salesman being sincere about why the interest rate was so high? Second, since I could pay this off at any point, I’m wondering how long I need to make monthly payments in order to establish enough credit. Is it really a year and a half? And lastly, since my credit is already so good, is it even necessary to make myself a more desirable borrower?
One thing’s for sure: You’ve made some great money moves so far. Good job! And you’re right, your excellent credit score ultimately serves to help access the best financial offers and save you money on interest rates. Now, to answer your questions.
First, the salesman is correct; you’re a higher credit risk because of your first-time borrower status and limited credit types. Second, it’s a loan through the dealership. These loans are historically inflated because most dealerships make more money from financing than from the mark-up on a car. (You can get loans from other sources; more on that below.) It’s also true that used car loans will come with a higher interest rate; however, it shouldn’t be more than 1-2% higher than a new car auto loan. The average interest rate for a 60-month loan on a new car is 4.58%, while a 36-month used car loan has an average rate of 5.36%, according to Bankrate’s latest numbers.
How long will it take to establish credit history with my auto loan?
If you choose financing over paying in cash, it will help build your credit rating as long as you pay responsibly and on time, but there isn’t a specific timeframe for this credit-building strategy. Keep in mind that the car salesman wants to get you to sign on the dotted line as quickly as possible. If he convinces you to choose the dealership’s financing and to make payments for a year and a half, he’ll get commission on the sale and the dealership will make money from the interest you’ll pay on their financing. In order to build your credit, it doesn’t matter what financing option you go with, dealership or through another lender, as long as you make timely payments.
How do I become a desirable borrower?
Having a diverse credit portfolio, such as having credit cards, student loans and auto loans in your name, along with making timely bill payments, is important in order for you to be seen as a desirable borrower. However, a good credit score should also save you money. Making timely payments on an auto loan will help you build your credit history, but taking on additional debt and paying a high interest rate for the sole purpose of becoming more creditworthy is counterproductive.
If you do decide to finance instead of pay in cash, here are some tips to help you in the process, and while you’re building your credit:
Instead of taking the dealership loan right away, spend some time researching other loan options first. With an excellent credit score of 779, you should be able to find better financing options with lower interest rates. Credit Karma shows you offers based on your credit profile. You can qualify for independent financing through a bank or a credit union before you head to the car lot.
If you plan to apply for several auto loan options, do it within a short amount of time; all of the hard inquiries from applying for several lenders should count as a single hard inquiry if they are initiated within a short timeframe, which means less damage to your credit score. Though there’s no standard for how short of a timeframe, you should be safe if you stay within a 30-day period.
Find a trusted family member with good credit to cosign the auto loan for you. Both of your credit scores will work in tandem to get you a better rate on your new loan, which will cost you less on interest in the long run.
Once you buy your car, keep the cash you’ll be using for monthly payments in a high-yield online savings account for bonus interest earnings. While interest rates on savings accounts aren’t high right now, earning a little extra in interest earnings helps toward paying down your car. This is a great option for you, since you already have the cash saved up for your car.
Pay More Than Your Monthly Minimum
By doing so, you’ll speed up your loan repayment while also saving money on the interest. Plus, you’ll still get the credit-building benefits of the auto loan.
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