For many people, a used car loan is an excellent option for financing a car they have their eye on. If you are looking at buying a used car and are considering lending options, explore some of the benefits of used car loans that can help you find the vehicle financing options for you.
Used Car Loans are Good for Your Credit Score
If you have a low credit score or limited credit history, a used car loan can help you improve your credit. When you take out a used auto loan from a lender, you can build credit by making payments on time over the term of the loan.
Used cars are generally more affordable than new models, allowing you to take out a smaller loan than if you purchased a new vehicle. If you’re aiming to improve your credit with a used car loan, keep the following tips in mind:
- Keep a good track record by making your payments on time, before the due date listed in your contract
- Contact your lender ahead of time if you think you might miss a payment, they may have a skip-a-payment program to help you for that month
- Refinance to a lower interest rate after six months to a year to help you pay off the loan more quickly and lower your debt-to-income ratio
A Poor Credit History is Not a Deal-Breaker
A used car loan may allow you to purchase a car even with poor credit. When lenders decide whether to approve you for a loan, they look at several factors. These include your credit score and history, but they also consider the vehicle’s purchase price and value.
New cars lose 20% of their value after the first year, so you will need less financing for a used vehicle. It also means that the car will likely hold more of its value from the time you make the purchase. This can help you get approved for a used car loan because the lender can list the car as collateral on the loan to mitigate the risk of letting you borrow the money.
As a T&I Credit Union member, you can take advantage of our credit services to prepare for a used car loan. You can access a free credit score analysis to understand your score and how it will affect your ability to get a used car loan. You may also use our credit counseling services to improve your financial situation for better used auto loan rates.
Preferable to Leasing a Used Car
getting a car, like leasing. When you lease a car, you rent the vehicle from the dealership by making a monthly payment.
Leasing can get you into a vehicle quickly, but because you aren’t paying to own the car, it’s a poor option for the long term. It can also cost you more in fees, such as mileage charges, ranging from .10 cents to .50 cents for every mile you drive over the leasing contract’s allowance.
A used car loan is a better financial decision to finance a vehicle. When you take out a car loan, you borrow money to purchase the vehicle. Your name goes on the vehicle’s title, giving you the right to sell or transfer ownership. Although your lender has a lien on the car until you pay off the loan, your monthly payments go toward owning the asset rather than simply renting it.
Variable Interest Rates and Monthly Payments
Used car loans come with variable interest rates and monthly payment options, depending on your lender. Some lender terms require you to pay back your loan in as little as 24 months. These lenders can also charge as much as 20.99% for credit scores of 500 or below.
T&I Credit Union offers 60-month used car loans on pre-owned vehicles from 2014, starting at 4.75%. With a loan from T&I Credit Union, you can pay back your used car loan over five years, allowing you to spread your payments out for a lower monthly obligation.
Though your initial interest rates may be higher if you have a low credit score, you can apply for refinancing once you have made enough reliable payments. A refinanced used car loan from T&I Credit Union can mean lower interest rates during the remainder of your loan term.
When you take out any loan from T&I Credit Union, you can easily manage your monthly payments with the T&I mobile banking app. This app can schedule automatic deductions from your bank account to ensure reliable monthly payments and a better credit history.
Find Used Vehicle Loans from T&I Credit Union
If you are in the market for a used vehicle, consider a used car loan to secure the financing you need. With T&I Credit Union, you can apply for a used car loan online or with one of our loan officers.
Contact T&I Credit Union today at (248) 588-6688 to learn more about our used car loans, credit score analysis, and other helpful financial services.