For most people, buying a car will be the biggest expense of the year, unless they are buying a house. Whether you are buying a new or used car, you are going to have to pay a significant sum. This often means squeezing an already tight budget. Since new cars are expensive, most people will buy used cars. If you’re like most drivers, you should consider used car financing when buying your next vehicle.
Usually there are used car rental programs, but they are hard to come by and may not fit your budget or financial lifestyle. So the reality is that financing your next used car purchase involves taking out a loan. Finding the right loan is key because you want to make sure the car you buy won’t put you in a financial hole or push you deeper into the one you’re currently in. The good news is that you can get a used car. car loan even if you have bad credit. In fact, getting a used car loan can be the first step in rebuilding your credit history. You just have to make sure you stay current on all your rental payments.
Your credit and you
As with any loan, the terms and conditions of your used car loan will depend on your credit rating. Also, your credit history will impact how much you can borrow. If you don’t already know your credit score, you can visit Equifax Canada or TransUnion Canada, two of the agencies that score credit for all Canadian drivers like you. Scores range from 300 to 900, with the higher number indicating a better credit score. If you have a credit score of 760 or higher, then congratulations, you have an excellent credit score. Most people end up with a score between 660 and 724, which means they have good credit. If you have a score below 660, don’t worry. That doesn’t mean you can’t get a used car loan. It only means that you might not get the best deal.
Everything you do with your finances affects your credit rating. If you bounce a check or are late on a credit card payment, your credit rating will drop. Your credit rating will suffer if you file for personal bankruptcy or lose in a civil suit. Likewise, if you start paying your bills on time, you’ll start to see your credit rating go up. It’s the reward for working hard and being conscientious.
Financing a used car with good credit
If you have a score of 660 or higher, you should have no problem getting a used car loan on very competitive terms. This is because the banks will be competing for your business. They see you as a good to excellent credit risk and are therefore willing to extend credit to you. That’s why you probably get so many unsolicited emails from banks and credit card companies offering to do business with you. Indeed, these financial companies earn their money by granting loans and repaying them with interest. Since they consider you a good credit risk, they will be more than happy to help finance your next used car purchase.
When you’re someone with good credit, you should know how much banks and other finance companies are willing to lend you so you have an idea of how much you can spend on your next used car. This will involve being pre-qualified for a loan. You can do this in minutes through an online portal on the website of the used car dealership where you plan to shop. With just a few financial details, you can know your budget.
One thing you need to keep in mind is that not all used car loans are the same. Some have higher interest rates and others have shorter loan terms. You’re going to want to find one with the lowest interest rate and the most available credit you can spend. This is the sweet spot for any used car loan for someone with good credit. Also, you should know if you have the right to refinance. Interest rates are constantly changing, and a good interest rate today might not be good tomorrow if banks lower rates. That’s why you should try to make sure that this option is available to you.
Financing a used car with bad credit
If you have bad credit, you might think your chances of getting a loan for your next used car are slim to nil. That couldn’t be further from the truth. In fact, most used car dealerships and online auto retailers offer loans to people like you who have only fair or poor credit history. Although you may not qualify for some of the best bank loans, you can still get a loan on competitive terms.
Just like people with good credit, you should try to pre-qualify for a used car loan. This will allow you to see your options and set your budget. The worst thing you can do is take out a used car loan that you can’t afford. By pre-qualifying, you can see how much you can borrow, calculate the monthly payment amount, and then determine if you can afford it based on your monthly take home pay.
The benefit of getting a used car loan is that it can be the first step to rebuilding your credit. Paying off things like a car loan, mortgage or credit card in a timely manner shows banks and other financial institutions that you are creditworthy. It means you are a good risk to them. You can actually check your Equifax Canada Where TransUnion Canada credit score every month to see it go up. Additionally, you will likely start receiving mail from banks and credit card companies offering to do business with you. This is always a good sign for people busy rebuilding their credit.
Financing a used car after bankruptcy
Personal bankruptcy was created so that people who are in serious financial difficulty can seek the assistance of the courts to get them out of their situation. While it helps them pay off or restructure their debts so they can start to get their lives back on track, it’s also one of the biggest ways to hurt credit. Filing for bankruptcy can drop your credit score by up to 200 points, leaving you with few options when it comes to things like credit cards. However, this does not close the door to used car financing.
Just like people with poor credit, many used car dealerships offer loans to people coming out of bankruptcy. Although the interest rates may be higher and the terms may not be as good as you might get from a bank, this is still a good way to get a used car while rebuilding your credit. The fact is, most people need a vehicle to get to and from work, and a used car is a great commuter vehicle. Plus, as you pay off your used car loan, you’ll see your credit score go up.
Refinance your used car loan
The good news for people who have obtained financing for a used car with a fair or bad credit rating or after personal bankruptcy is that you can still refinance your car loan. Once you have demonstrated that you have made full and timely payments and your credit score has increased accordingly, you can then start applying to other banks and financial institutions to see if you can get a lower interest rate, a lower monthly payment, or a longer term. You can also see if the used car dealer where you bought the car is interested in using the car you currently own in exchange for a newer used model. It will also allow you to take out a used car loan with less than optimal terms and get one with better terms.
Used car financing is a great way to get a fresh start
We all need cars, and used cars are still the smartest car investment you can make. Plus, buying a used car with a loan is an ideal way to give your credit score a significant boost. That way, when you’re hitting the highway in your latest used car, your credit rating skyrockets to good, even great.