So you need a new car. Your’s broke down, needs a ton of maintenance, is getting too old and unsafe, or you just want something cool, either way you may need an auto loan to purchase that perfect car for you.
When should you get an auto loan?
Auto loans are used in several different situations.
- The new saftey and technology of buying newer car
- Your current car is ready to fall apart and its time for something else
- Your payments are higher than you can afford and you need to get into a cheap car
- Refinancing a current vehicle to lower payments, shorten the term, or lower your interest rate.
It makes since that when you can’t afford to outright buy a new car, and you NEED a new one to take out an auto loan. What you may not know is that it makes even more since to try and get a lower interest rate on your current vehicle. This is called refinancing your car; you replace your current loan with a new loan from a different bank. It is not nearly as common as the home mortgage refinance, but can save thousands of dollars over the life of the loan. The rates for auto loans have plunged recently and people are getting lower rates than were previously possible. I know this from personal experience, because a month ago I refinanced my current car, knocking a full year off of the term and keeping my payments the same. I was very happy with the results.
In a perfect world, we would all pay cash for our cars, but in this world, auto loans are a great way to buy cars. They offer relatively low interests rates as long as you have established a good credit history (you have been paying your bills on time, right?), provide a monthly payment that doesn’t change, and are typically simple interest with no early payment penalties. If the loan does have early payment penalties, it should be avoided, because you can refinance or pay off the loan early without incurring additional fees.
Get All 3 FICO Scores and Credit Reports!
Next to credit cards, auto loans provide great ways to build credit history. And as opposed to credit cards they offer the same payment every month, which is great for the budget-minded individuals. Although people with no credit history or bad credit history may have a hard time getting an auto loan on their own, a co-signer with good credit is a great way to help build up or build back up your credit. Being a co-signer for someone else is a completely different post, but in short, I don’t normally reccommend it unless they are very closly related (in the same household).
Auto loans are a great tool for getting the car of your dreams, just remember that if you can not afford the payments, your credit history will be negatively affected and the car will be repossed. A repossesion in your credit file will HAUNT you for years. Be safe with auto loans and they will help your credit tremendously; it is worth I promise.
My reason for getting an auto loan:
My Dodge Neon SRT-4 with a Mopar Stage 3R turbo upgrade. It is fun and fast (350hp). Cars are my passion, finance is my profession, wrap them together and you get…..an auto loan?
Stay safe and have fun!
Once again, thank you for visiting my website. If you have any questions feel free to email me at marcusmarc@gmail.com
Thanks!
~ Marcus