If you are in the market for a new vehicle you should know that there are many types of auto loans available. Most automotive dealers offer a variety of ways to finance your new or used vehicle. What you should know is most of these loans you must qualify for. This means that your credit rating will play a large part of what you are actually going to be eligible for.
For example if you have an excellent credit rating you are going to qualify for any type of auto loan you are interested in. You can qualify for the promotional rates offered by most major car manufacturers. These types of loan interest loans can save you thousands of dollars in financing charges over the life of the loan. Many of these interest rates start and 0%, the only catch to the lower interest rate is the fact that the term of the loan is usually only 48 months.
If your credit rating is considered good then you will generally qualify for any of the car manufacturers financing plans or a bank loan. These loans for your credit rating will incorporate a higher interest rate. You will usually pay a few percentage points over the current prime rate. The good thing about these rates is the financing companies will oftentimes let you extend the loan terms to 72 or even 84 months. This type of flexibility will let you reduce the amount of your monthly payments.
If you have poor to fair credit then you may have trouble financing a vehicle in the traditional manner. It is unfortunate but because of your credit rating most traditional lenders will look at you as a high risk of defaulting on the loan. In order to get traditional financing you are going to need a large down payment. This means at least 40% of the car’s cost will need to be paid up front. If you do have that amount for a down payment you can use the traditional financing to raise your credit rating if you make all your payments on time.
If you have poor credit you are going to either purchase a vehicle for cash or you will need to visit a car lot that will allow you to make payments to them each week. These car lots are generally referred to as a “buy here, pay here” lot. These dealerships will finance your vehicle for you but you are going to pay a very high interest rate. Make sure before you sign the paper work at a dealership like this you understand how much interest you are going to end up paying at the end of the loan.
When looking to purchase a new or used vehicle the ease in which you are going to obtain financing is going to be directly affected by your credit rating. The better your credit rating is the more options that you are going to have when it comes to choosing one of the many auto loans available.