1 Simple Rule to eliminate all your Bad Credit Auto Loan Troubles

Market research and expert analysis can be quite confusing. One day you come across news that says bad credit auto loans are riskier for lenders. The very next day you will hear how deep sub-prime lending is on the rise. Don’t get overwhelmed by the constant news bombing about bad credit scores. Remember that a car is and will remain a necessity for Americans. People need it to drive to their jobs. Recession or boom – cars are here to stay.

Also, the auto lenders will remain attracted to the sub-prime market. This is because a large population of America has bad credit score. So, don’t worry about news reports that say bad credit auto loans are getting difficult. Just start working on getting an affordable car loan with this auto financing guide.

1st may not be THE BEST

Remember that good things come to those who work hard for it. Opting for the very first sub-prime credit car loan quote will be a bad decision. Take your time in doing research. Ascertain your financial situation before taking any decision. Calculate your car budget carefully. Remember! Your auto loan has the potential of improving your credit ratings as well as the power of ruining it. So, choose an affordable vehicle that will ensure easy payments.

Lesser Risk – Higher Approval Chances

This is the simple rule that can help you acquire bad credit auto loans. Lenders don’t want to lose their money by approving a risky bad credit application. Your approval chances will rise only when the lender won’t have any tension of his money.

How to reduce the Risk Factor?

A lender sees you as a risk because of your credit history. You need to ensure him that you are capable of assuming a financial burden. Here are ways to help you decrease the risk:

Manifest your Financial Capacity

Lenders are willing to offer auto loan to bad credit borrowers. But, they want regular payments which is only possible with stable income.

1. Recent pay-stubs/IT Statements and Employment Verification Letter can be used as proof of your stable income and employment.

2. Show your bank and financial statements to the lender. It will help him analyze your financial situation.

Lower the Loan Amount

Lenders won’t have trouble in approving a smaller loan amount because it is less risky.

1. Opt for a less expensive used car because it will reduce the loan amount.

2. Pay 10%-20% of the car cost as down payment and lower the loan amount.

3. Trade-ins and rebates can be useful in reducing the car financing amount.

Others

1. Inform the credit bureaus of any error in your credit report. This will improve your score and have a positive impact on the lender.

2. Co-signer can lower the risk because the lender will be assured of regular payments.

Once the lender is sure of your commitment and current financial standing, he will approve your bad credit auto loan. This is because he will understand that bad credit is just your history and nothing else.

So, next time you begin your car financing journey, don’t forget the simple rule of 'Lower Risk – Higher Chances'.

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Is 8 Year Auto Loan Term beneficial for New Car Buyers?

Cars and car loans have become equivalent. If you want to buy a new car, an auto loan has become a complete necessity. With growing need of auto financing and increasing competition in the car loans market, lenders are constantly trying to innovate. Past several years have seen pioneering ideas like no money down auto loans and no co-signer car loans. This year has been no different in terms of innovation because lenders have brought highly unconventional "8 Year Loan Terms".

Auto lenders have become increasingly enthusiastic in offering car loans with unexpectedly longer terms. Experian Automotive March 2013 report divulged information about the average loan terms. The average terms have increased to an all-time high of 65 months. And, now the experts are predicting that 96 month loan term will become popular.

Why are Loan Terms becoming longer?

The report also disclosed the rise in new car loan amount. The average new auto loan amount for Q4 2012 has increased by $272. This shows that car prices are rising steadily which makes it difficult to buy a new car. But, if the new car sales dip, it would affect the automobile industry. So, lenders have started offering longer terms to help Americans fulfill their new car dream.

Also, there is a growing appetite of consumers for car loans. The current economic period is better compared to the recessionary years. Credit borrowers have performed exceptionally well in making regular payments. This allows the lenders to have faith in car buyers.

Benefits of Longer Car Loan Terms

Buying your Dream Car

It is not possible for everyone to buy a new car because of high monthly payments. But, longer terms ensure affordability. This gives you the opportunity of buying any car you want.

Lower Payments

If you opt for shorter term, you have to deal with high payments. But, longer loan terms allow you to lower your monthly payments. This means you will experience considerable ease in making payments. An example will make things clear. If you buy a car for $35,000 at 4% for 4 years, monthly payments will be $790.27. And, if you extend the term to 8 years, payments will be approximately $426.62.

Regular Payments can improve your Credit Score

A 7-8 year loan term is a big responsibility. If you are able to make regular payments, your credit score will definitely increase. It will also show other lenders of your commitment and financial capacity.

Problems with Extended Loan Terms

Pay More towards Interest

Longer loan terms give you flexibility by offering affordable payments. But, you have to pay a price for it. Over the entire term, your total interest amount will be on the higher side. Let's use the same example of $35,000 car at 4% for 4 years and calculate your total payment towards interest. It will be $2,932.81. And, if you opt for 8 year loan term, it will be $5,955.97. This means you will have to pay $3023.16 more.

Higher Chances of Upside Down

A car is a negative asset because its value decreases over the period of time. The depreciation rate of a new car is phenomenal which means there are higher chances of an upside loan. If such a car is stolen or is involved in an accident, the insurance amount won't cover your loan amount. This will be detrimental to your financial condition.

Maintaining your Car

If your car has warranty, your maintenance cost will be low. But, when you opt for 8 year term, your car will not have any warranty in the last few years. This is because most new automobiles come with warranty of 3-5 years.So, your maintenance cost will increase in the future.

Every innovation has its pros and cons. And, its importance is going to be different for every individual. So, think through and decide whether "8 Year Loan Term" is a stunning opportunity for you.

Best of luck in choosing the best auto loan term!!!

Rapid Car Loans is the perfect auto financing partner for every new car buyer. Get highly customized new car loans option and get an opportunity of making highly affordable payments. Apply now and enjoy no obligation free loan quotes.