Medical bills, layoffs, plain bad luck … there are all sorts of reasons you might be facing credit challenges in your financial life. But it doesn’t have to keep you from getting a car, it just means that you’ll have to be realistic and shop around. Here’s why your credit shouldn’t keep you from a better car.
No matter your credit, Federal Auto Loan can help!
Credit Isn’t Everything
First, you need to sort perception from reality. The perception, especially if you’ve tried to apply for a few credit cards or a different type of loan, is that your credit essentially renders financing for anything a dream. That’s not actually the case with car loans, for a few reasons.
The most important one is, simply, you’re not the only one who’s faced credit challenges and needs a car to get to work or to run vital household errands. In fact, a surprising amount of the country is getting back on its feet after suffering some form of setback, whether from the tough economy or for other reasons. As a result, the “subprime” sector of auto loans has grown quickly to compensate. Don’t be fooled by the news: “Subprime” is just a credit designation, not a type of loan. Often if you can demonstrate consistent income and ability to make payments, you can be approved for some form of loan despite your credit challenges.
Secondarily, an auto loan is for an asset that has value and can actually be sold off to pay off the loan if it comes to that. The idea, of course, is that it doesn’t, but it does mean there’s substantially less risk involved for the lender than other types of instruments. But even without that risk, there’s still some points worth being aware of as you look for a car loan.
The right car the right way with Federal Auto Loan!
Bad Credit Doesn’t Mean A Bad Deal
It is true that if you’ve faced credit challenges, you are going to have to accept that those with better credit can secure better rates. It’s not fun, but that’s the way it is. That said, however, that doesn’t mean that you can’t get a better deal than you think.
Car loans have three key components: The principal, or what you borrow; the interest rate, what you pay above the principal; and the term, how long you take to pay it back. Look for loans that have the lowest of all three; the lower the better and the less interest and overall cost you’ll pay to get on the road.
Another way to lower your costs and get a better deal is to save up a down payment. Down payments are generally 20% of the overall cost of the car, and that’s not necessarily possible for everyone. Still, if you can put together a down payment of even 10%, that demonstrates fiscal responsibility to lenders, and just as importantly, it means you’ll have to put down less to buy your car.
In short, credit challenges are only insurmountable if you let them be. If you work to overcome them, you can get the car you need.