Speed Up the Auto Loan Process to Avoid Reduction in Credit Score

 Happiness is the smell of a new car!

Buying a car is an emotional experience for car buyers. It is not like buying a phone or a television set. It gives a sense of fulfillment and satisfaction to car buyers. It is for this reason that many car buyers spend several months in selecting their dream car.

Once you have chosen a car model, finish the auto loan process without any delay. It doesn't mean that you should opt for the first auto loan quote that is offered to you by a lender. But, it is important to wrap up the auto loan process quickly.

Why should you finish the Auto Loan Process quickly?

You should not spend a substantial amount of time in choosing an auto loan because of the following reasons:

1. The dealer may sell your chosen car model to another buyer.

2. Interest rates may increase in the future.

3. The manufacturer incentives program may not be available in the future.

4. Any unexpected expenditure may cause you to delay the car buying process.

Credit Inquiry

Another important reason for wrapping up the auto loan process is credit inquiry. When you apply for a loan with a lender, you give him/her the authority to "inquire" a copy of your credit report. Credit inquiries have the potential to affect your credit score.

Rate Shopping - Is it harmful for your Credit Score?

Credit inquiries reduce your credit score but it doesn't mean you should stay away from rate shopping. Rate shopping is the act of obtaining interest rates from several lenders for a single loan type. The motive behind it is to choose the lowest interest rates from the available options.

It is important to remember that applying with multiple lenders for multiple loans such as auto loan, student loan, home loan, etc. doesn't mean rate shopping. Every such credit inquiry will reduce your FICO score by 5 points.

45 days is the Limit

FICO score considers all credit inquiries related to a single loan type within a time span of 45 days as a single inquiry. It means that you can apply with as many lenders as you want within 45 days in order obtain the lowest interest rates.

Don't take time for granted. As it is limited, try to take in the best from every moment. If you have decided to buy your dream car, do not shy away from making quick and calculated decision. Search for the lowest interest rates and sign the dotted line within 45 days.

Why Financing Your Car Loan at a Credit Union Is a Smart Choice

 When you're buying a new or used car, people typically go straight to the local dealership. While dealerships make their own financing programs sound especially attractive, it's always to your benefit to shop around for the best auto loan rates-starting with local credit unions. Here are some reasons why you'll find better auto loan rates and more personalized service at a credit union.

You have a much better chance of getting your loan approved if you have second-rate credit or have had some credit problems in the past. They will more likely listen to your personal story over a traditional commercial bank.

A credit union is different than a traditional bank or other lending institution. They offer loans and other financial services to people through a cooperative membership and it is much more than just a place to house a checking or savings account. They show their members financial interest as a high priority and they are not in business to sell their members anything just to inflate loan volumes. Best of all, their profits go back to their members in the form of lower rates on other products and services like savings and loans. There are 377 credit unions in California with over 1550 local offices. Overall, throughout the country, they save their members approximately $8 billion a year in fees, dividends, etc.

Most credit unions offer better rates to their members or other financial institutions. Especially the banks available through the local car dealerships. Whether you have a large or small down payment for your new or used car, they can educate you on the best possible deals for your auto loan. According to the latest report from Informa, the average rate on a $30,000 new car loan from a bank is 4.16% and from a credit union is 2.82%; which is a 32% reduction in rate and equates to a savings of $1,100 over the life of the car loan.

As a member you have access to educational resources. Almost every credit union has a member or resource center where members can educate themselves about financing options and how to evaluate the value of their vehicle purchase. If you are an inexperienced car buyer you can turn to them for an unbiased opinion. Most importantly, they can show you how to calculate the real value of the car you want to purchase, not just what the dealer tells you, which will ultimately affect your final decision.

Enjoy a member-centered approach. Since loan decisions are made by a local volunteer board rather than a corporate office, members have a more personal experience. This local approach gives you the opportunity to discuss your loan options, discuss flexible repayment choices, as well as review your entire financial situation with your personal loan representative. This type of personal interaction takes away the pressure of applying and locking in your financing and you can be assured they are working with your best interest in mind.

A car loan is helpful. But a good car loan can make a dramatic difference in your life. Financing your next vehicle with your local credit union can save you money, reduce worries and minimize hassles. They specialize in good car loans that fit your specific requirements.

Longer Auto Loan Term: Is It Right for a Bad Credit Car Buyer?

 Auto loans are tricky. A single error can ruin your financial stability and earn you high interest rates in the future. So, it is important that you understand every aspect of the loan process and make a wise decision.

When it comes to analyzing the multiple aspects of an auto loan, loan term takes a backseat. If you are in the loan market and confused over choosing the perfect auto loan program, do not commit the mistake of ignoring the loan term.

What are the Different Auto Loan Terms offered by Lenders?

A couple of years ago, the recommended term offered by lenders was 5 years or 60 months. However, the time has changed. Today, you can easily obtain 8 years or 96 months loan. Also, there have been instances where you can keep making payments on an auto loan for 9 years or 108 months.

Is a Longer Auto Loan Term considered as a Boon for Bad Credit Car Buyers?

If you are a bad credit car buyer, you will obtain higher interest rates than a good credit car buyer. Lenders understand that higher interest rates will make monthly payments difficult for you. So, they provide longer loan terms to make monthly payments bearable. Does it mean a longer loan term is a boon? It's time to understand the financial effect of it.

The Interest Amount

If you have bad credit history, lenders will provide you with high interest rates. And, higher interest rates over a long period of time means higher amount of interest.

The Upside Down Situation

If you obtain a short-term auto loan, you will be in an upside down situation for the first couple of years. But, if you opt for a longer loan term, you will owe more than the car's worth for several years. It is because you will make smaller payments every month.

The Selling/Trade-In Problem

If you are in an upside down situation, your car has no equity. It is difficult to sell such a car and buy a new one. Also, it is a challenging task to trade-in the car for another vehicle.

The High Maintenance Cost

If you opt for it, you will face difficulty in selling the car. And, if you keep using the car for several years, you will have to take care of increased maintenance cost such as higher repair cost and greater fuel expenses.

When is a Longer Auto Loan Term recommended to Bad Credit Car Buyers?

It makes financial sense in the following situations:

1. If you have received very low interest rates on the loan

2. If you can opt for substantial down payment and reduce the chances of an upside down situation

3. If you use your car for a very long time

There is nothing wrong in opting for a longer auto loan term. But, it is important to ascertain your situation before making a decision. Remember to look before you leap.