Diving into the World of Auto Loans

(FinancialHealth)- Credit is a real pain, isn’t it? It prevents you from getting all the things you dream of getting, like a roof over your head or the car of your dreams. Generous auto loans are hard to come by these days, especially with lenders not willing to take too many risks given the economy is trying to recover. Not everyone can afford a car and we can understand that, but what if we were to tell you that there is some wriggle room? We’re going to dive into the world of auto loans, so you can know what’ll get you the best deals possible.

Is Bad Credit Always a Problem?

The best thing to do is to tackle the worst situation first. Bad credit is a big inconvenience, so the first thing you need to do is take steps to build it up and pay back your debts. There are several loans that people have been looking into, but it should be noted that these loans do have fees (in the form of interest). Here’s how it works. When you choose to get an auto loan, the lender makes you pay a compulsory fee for the financing service. It is from this fee that the lender can make a profit.

The most popular lenders these days are Auto Credit Express, Lending Club, Capital One, and Carvana. Yet, many don’t realize that the fees may take a toll, and this is why dealing with these lenders may not be the best idea. This is something worth noting when making your decision. The best thing to do in the long-run is to pay back your debts to get a better loan offer.

Getting a 0% APR is Like Flying Business Class 

A zero APR auto deal works differently and you are going to like this. You get to borrow the money without paying the fee and all the lender gets is what you pay back. This is the best option you can get if you have good credit.

Now, you may be thinking that this is too good to be true. The fact of the matter is that it doesn’t just benefit you. It also benefits auto manufacturers, since they want financing options that would encourage people to buy their cars. They do this so that they can increase their sales.

Offered by what’s known as captive finance companies, these organizations are connected to the auto manufacturers themselves. You’ll find some of the most well-known captive lenders include Nissan Finance, Toyota Financial Services, Ford Motor Credit, and GM Financial along with many others. So in a sense, the car companies give you the money to buy their cars and you pay them back for it every month.

Beyond all the sugarcoating, some may have the misconception that zero-interest financing for cars is more affordable. It’s important to note that when the lender (who is affiliated with the auto manufacturer) lends you the money, they will try to compensate for the loss by forcing you to buy extended warranties and different types of insurance policies for the car. This is something that you need to be aware of when you deal with them.

0% APR Sounds Good, But Do I Qualify?

The downside of auto loans that don’t have fees is that they demand a high credit score, such as 800. Now, if you have bad credit, you would need to take steps to build it back up. However, it’s also important to note the requirements for zero APR loans can depend on the company that you choose to deal with. To apply, you must inquire about what’s expected for you to qualify. Lenders will also take your employment history, income, and debt-to-income ratio to determine if you qualify for the loan or not, so be prepared!

~Here’s to your Financial Health!

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