When it comes to car finance, there are a lot of myths and misconceptions floating around. Many people believe that car finance is only for people with bad credit, or that you have to put down a large down payment in order to get approved. In reality, there are a variety of different car finance options available, and you may be able to get approved even if you don’t have a lot of money saved up. So if you’re in the market for a new car, be sure to read on for some debunked myths about car finance.
Table of Contents
You Need A Perfect Credit Score To Get Car Finance
Many people feel that vehicle financing is only available to those who have impeccable credit, but this is not the case. In reality, many of the greatest vehicle loans are available to those with bad credit as long as they can provide proof of consistent income and other desirable qualities like being engaged or having numerous kinds of security. While it’s possible to receive a horrible deal if you don’t know what you’re doing when looking for a loan for bad credit, there are plenty of lenders eager to work with consumers to assist them get into their new car and drive off into the sunset.
You Need To Put Down A Large Deposit
Many consumers also believe that putting down 20% to 30% is required before they can buy a car. This is not the case, since most lenders would accept your application with no money down. Only if you’re purchasing a new automobile and want to take advantage of the dealership’s incentives will you need to put down a deposit. If you’re purchasing a used automobile and not trading in another vehicle, you won’t need to put down a deposit. Furthermore, you should pay close attention to and be cautious with your vehicle payments, and you should always calculate car payments to ensure that you are paying the correct amount.
You Have To Pay A Lot Of Interest
While it is true that lenders offer higher interest rates to persons with weak credit, the majority of consumers pay approximately 8% per year when they finance a new or used automobile. If you have excellent enough credit, you may be able to qualify for 0% financing in some situations. If the shop where you’re buying your automobile doesn’t provide any incentives, go around with several lenders to locate one that does. After six months or so of having a vehicle loan open, you may want to look into getting a car refinancing loan; this will allow you to transfer to a new lender and maybe save money.
A widespread myth is that in order to be eligible for funding, you must pay down 20%–30% of the cars worth, however this is not the case. Most banks just want 8-12 percent if your credit ratings satisfy their minimal standards (usually 620+). If you buy from a dealership, they may attempt to convince you that putting down less than 20% will raise your loan rate, but this isn’t always the case. Because many dealerships aren’t able/willing to provide 0% bargains lenders can do directly with customers, it truly relies on what alternative offers are available to you through the bank or finance provider.
Have To Sign Up For A Lengthy Contract If You Want Car Finance
Many people feel that vehicle financing is only available for extended periods of time, but this is not the case. If you’re looking for a long-term commitment to your new car (and don’t want to be plagued with loan payments after eight years), 8-year loans are a great alternative, but they’re not the only way to be approved. Many banks and financial companies will provide shorter terms of roughly 36 months or less, allowing purchasers who don’t think they can afford an 8-year
Mortgage (or just don’t want all of their money locked up in one transaction) to do so.
You Can’t Get Car Finance If You’re Self-Employed
Another widespread misunderstanding concerning vehicle financing is this. The fact is that self-employed people can acquire vehicle loans; it simply takes a little more effort. In addition to your credit score and other loan application information, you’ll most likely need to present your most recent tax return and bank records as evidence of income. Getting a vehicle loan as a self-employed person is absolutely possible provided you’re ready to put in the extra effort.
Monthly Car Payments Will Be Really High
One prevalent misunderstanding is that monthly automobile payments will be prohibitively expensive. This isn’t true at all; in fact, you can acquire a car loan with no money down (in some cases). There will be no difficulties obtaining acceptance to finance a new or used automobile as long as your credit score matches the lender’s standards for approval. Also, if you have a consistent income that you can show with your most recent tax returns and bank records, the lender is more likely to offer you a reduced interest rate on your auto loan.
It Will Take Forever To Get Approved For Car Finance
Pre-approval for a car loan does not take long; if you apply online, it will only take you approximately 15 minutes. Filling out an application form and submitting information such as earnings, job status, employer details, and so on; anything except personal inquiries like age and marital status, which are considered sensitive data. Furthermore, if you have all of the necessary information on hand, the lender will only need a few minutes to check and process your application.
Car Finance Is Expensive
Car financing isn’t always prohibitively pricey. Car loans offer a low interest rate, which may be lower than the interest rate on your credit card or even other forms of debt you’ve already accrued. In reality, borrowing money from relatives and friends to buy a car rather than using an auto loan will save you money because they would most likely charge you hefty interest rates for borrowing their money. Furthermore, if you have all of the essential information, the lender will only take a few minutes to review and complete your application if you have it all together.
Before thinking you can’t afford car financing, take the time to look into all of your possibilities. There are many various financing options available, and with a little study, you might be able to discover one that works for you.