What are used auto loans?
Auto loans are a type of loan that you get when you buy or finance a vehicle. A lot of auto loans also have lower monthly rates compared to traditional new car loans, but the downside is that you’re likely to have less say over your financing and can’t sell the vehicle for as much money. If this is something you’re considering, and if your credit score is exceptional, then it might be worth your time.
Who qualifies for a used auto loan?
– Credit score of 720 or higher (ideally 740 or higher)
– Income that meets auto lender’s requirements
It- Good to have secured employment, the best interest rates are available to people with a steady income and a more established credit history.
You should also have one year+ of positive credit history and at least 3 references on your credit report. 740+ score is more likely to get you lower interest rates and payments.
Benefits
1. Lower or no down payments
One doesn’t need to pay cash for a vehicle, instead, they can get a lower interest rate on the auto loan by making use of the equity in their current car. This process is called depreciation and is important to consider if you plan to keep your vehicle for a long period.
2. Lower monthly payments
This can be because your down payment was small or you made use of depreciation in the price of your car. Either way, credit-used auto loans are a great financial move and pay off in short periods.
3. Use of the equity in your vehicle
When purchasing a used car, you are using your current vehicle’s equity (the amount of money put into the car) to pay for the purchase. This loan can be paid off in 3 to 5 years depending on how much you drive and what kind of a deal you got with the bank.
Conclusion
Auto loans are much more flexible than you might have previously thought. Being able to use your current car’s equity is just one of the many benefits of an auto loan. Used auto loans make it possible for anyone to purchase a vehicle, get a decent rate and be able to pay it off fairly quickly.
