Used Car Financing – What are Your Options?
Debt is not as bad as it seems. With the right debt, you can have the commodity that you need right now. Especially for expensive commodities like cars and houses, debt helps you to keep your monthly budget under control, buy despite your current income figures, and sometimes, help improve productivity by minimizing traveling time and improving the standard of living. So, it is probably a good idea to finance your next used car with debt, unless you have loads of cash, and the market is flooded with numerous auto loan options. The real question, however, is what are your options? Which credit offers are suitable for you and which ones will easily approve of you?
The lender you can approach will depend on your credit score
The US debt industry runs on consumers’ credit scores. The FICO score decides who all will entertain your loan request, how much loan can you apply for, and what will be the interest rates. As you may already know, typical credit scores fall into one of these three categories – good, average, and bad – and accordingly, the involved auto loan parameters are decided.
If you have a good credit score
Or a FICO score of 700 or more. You can apply for auto financing at the large banks or other similar private financial houses that deal only with prime debt. These entities do not approve any sort of loan to risky consumers who have the possibility of defaulting their credit and thus, consider only good score holders. You can apply for any loan amount as you want with a 700+ credit score. The interest rate is also in line with the general market rate.
If your credit score is average
Subprime or in the range of 650-700. You now hold a bit more risk than good credit score holders and your options include small financial institutions that give out subprime loans or credit unions where you will need to have a membership. The loan amount you can apply for will depend on your net income and how much the institution can afford right now. The interest rates are a bit higher than the conventional banks owning to the added risk involved.
If you have a low score or no score to show
Anything below 600 is considered a bad credit score. Or, you may also have no credit score to show if you have just started out in your life and yet to build any sort of score. Neither banks, big or small, or credit unions will consider your auto loan request. But you can always buy used cars in Greer, South Carolina, with buy here pay here dealerships. These dealers have their own in-house finance department. They are a lender themselves who do not prioritize credit scores for handing out approvals. Here also, the loan amount you can apply for will depend on your income, as your current job serves as your collateral, and the interest rates are a tad higher due to the dealer’s business in a highly risky environment.
And then comes the down payment
No matter which debt financing option you are eligible to take, you will have to pay certain percentage of the car’s overall price as down payment. Naturally, you will take the rest as credit and the interest will be charged on this latter amount. Try your best to make as high a down payment as possible while buying a used car in Duncan, SC. This will bring down your APR or the annual cost of your loan that you pay extra due to interest. Also, making a high down payment reduces the dependency on your credit score and you can apply at prime institutions with a subprime credit score.
The best way to pay a high down payment without exhausting your cash reserve is by trading in your old car. While searching for cheap cars for sale, pick those dealerships that have an exchange policy. The dealer will evaluate the monetary equivalent of your old car, include it in the down payment along with the cash that you are paying and help you to apply for a lower loan amount.
You can also opt for $500 down or zero-down financing options that most buy here pay here dealers offer. The catch here is that you pay almost nothing as down payment and still get approved for an auto loan. This feature is for those consumers who cannot afford to pay a high amount up front and does not have a car to sell as well. The in-house financing team of the dealer will help you with the necessary arrangements.
Auto financing for used cars in Greer, South Carolina, is no longer a worry today. Your financial capacity can stand at any level and you can still buy a used car with debt. All you need to do is explore your options, plan your budget, and head out to shop for your new used car.