Sometimes, buying a used car can be the best option you have, as it offers multiple advantages, like a lower price tag of your preferred vehicle, owning a certified, pre-owned model, and saving a lot of cash. However, you might need financial aid to make that type of purchase, which will result in you looking for a way to finance your used vehicle.
In this guide, we’ll show you the different types of loans that you can use to do that.
Credit Union or Banks
If you’re planning on getting a loan from a credit union or your bank, make sure that you are preapproved for an auto loan first. Knowing the type of car you want is your next step after that. You can estimate the costs of this used car via online tools like Kelly Blue Book or Edmunds. Once you obtain that information, you’ll be able to tell your lender how much money you need. While the bank may provide you with several advantages, your chances of getting approved are higher if you apply for a loan at a credit union. Besides credit union and bank loans, you will have other options with varying interest rates.
Online Auto Loans
Auto loans, especially the online ones, are a great option if you want an option that can help you can finance your used car in a short amount of time. They are convenient and quick in terms of processing your information. They’ll also offer lower interest rates compared to interest rates you’ll find in banks, for example. With online auto loans, you will have more options and lenders to choose from. However, make sure that the lender you’re working with is trustworthy enough. Better yet, make sure to seek a lender who was recommended by someone you already know to reduce the chances of scams.
Peer-to-Peer Auto Loans
Instead of getting your loans from the bank, you can get your loan from individuals or investors in order to finance your used car. The one main advantage of these loans is that your car won’t be repossessed if you don’t pay your installments on time. While this may be bad for your credit score, you’ll still get to retain your car and make up for the late payments. There are several platforms online for such loans, like the Lending Club, which will provide you with adequate loans. However, you’ll need a high credit score (at least 600) in order to apply for that type of loan.
Used Car Loans
Despite common belief, you may find several types of used car loans if you look for it. If you want to purchase an RV, you may even find an RV loan as long as you’re looking in the right place in the market. Keep in mind that to get these loans, your credit score must be average (at least 661). If that’s not the case, you can use credit score improvement strategies to increase your score. Only then can you apply for a used car loan. What’s great about used car loans is that inquiries won’t affect your credit, at least not negatively. As long as these inquiries are all made within 14 consecutive days, most scoring models will consider inquiries made within the 14-day timeframe one inquiry. A hard inquiry will certainly affect your credit score, but you can restore these few points within a year.
Online Lenders
Getting a loan from an online lender is another great option, as this process will be done online and will take less time than the traditional application process. Online lenders specialize in several types of loans, like auto loans or loans for people with low credit scores. What’s great about these loans is that you can be prequalified pretty quickly. You can also compare several types of loans much faster than you could with bank loans. You will also get the necessary funds pretty quickly. The downside is that the interest rates will vary depending on the lender. You may not like these types of loans, especially if you like to have face-to-face interactions with your lender.
Car Dealers
Depending on where you bought your car, you can get a loan from your dealer. Usually, auto dealerships will provide you with three options: dealer-arranged financing, buy here, pay here financing, and captive financing. The first type of financing involves filling up an application and submitting it to multiple lenders to see which one will give you the best deal. Buy here, pay here financing is designed for those with a poor credit score or have no credit history; however, they have exceedingly high-interest rates than traditional types of financing. Captive financing is offered by financing companies owned by the car manufacturer. This type of financing is great, but it is only limited to certain types of models.
Important Considerations
Before you choose the type of financing you want for your used car, you must get some facts straight. First off, you need to set up your budget. You can do this by examining your finances and how much you’re willing to spend on your new car. Of course, you’ll have to do some research first to find out the average price for the used model of the car you want. You should also take into account how much you want your monthly payment to be, as this will determine what type of loan you can get. In addition to that, you’ll need to consider other expenses associated with buying your car, like maintenance and repair costs.
Second off, you have to decide your down payment. After you’ve settled your finances and budget, check how much you can afford for your down payment. RV and car loans usually include at least a 10% down payment, so if you decide that you can afford this payment after you make your calculations, you can start saving early.
There are a lot of options out there when it comes to financing your used car. However, make sure that you get a full review of your financial situation and check your credit scores in order to determine whether or not you qualify for a loan. It’s important to review other aspects of your loan, like the APR, the term, and the monthly payment.