Can you finance a second-hand or used car? The answer is a big YES. You can finance a second-hand or used vehicle. But you need to ask yourself if you need a car loan. After all, there are a lot of risks when you are financing second-hand cars instead of brand new ones. In this article, we will discuss some issues when it comes to used cars, as well as some ways to go when you are financing pre-owned vehicles. Here is what you need to understand and know when it comes to second-hand cars.
Some pre-owned cars have higher interest rates than brand new ones
Used vehicles tend to have a high-interest rate compared to brand new automobiles for different reasons:
It is difficult to know how much a second-hand vehicle will be worth when the owner wants to sell it, but with brand new cars, depreciation is a lot easier to identify its market value. The bank or the lending companies are responsible for the unpredictability of the prices by raising the interest rates of the loan.To know more about credit rating, visit https://www.investopedia.com/terms/c/creditrating.asp.
That way the lenders can make extra money in case the buyer cannot pay the mortgage, or the vehicle will experience mechanical problems or excessive mileage (since this is used automobiles we are talking here). If you buy these pre-owned vehicles, there is a big chance that you have a terrible loan history or have a lower credit rating.
Not all people with excellent credit store buys a brand new car, but most people with bad credit score buy a second-hand motor vehicle because they can’t get good deals on financing a new one. Not only that, the upfront cost is too much for people with prior or existing debt to pay (which is the reason why their credit rating is terrible).
Your insurance rate might be higher
Pre-owned vehicles do not have that many safety features compared to brand new ones. They also have higher mileage, and there is a big chance that they will break down more often. It means that the insurance rates on these cars are most likely going to be a lot higher. But if you are financing a vehicle, either it is used or brand new, you will pay more since you will be required by the lender to purchase additional insurance.
If you buy a car in full, you will only purchase liability insurance that will cover the cost of the damage that was done to other vehicles but not to your own in case you will be involved in accidents. But if you plan to finance a car, you will need to obtain comprehensive insurance coverage that includes the cost of the damage that was done to both vehicles involved in the accident, including your car.
It will make sure that the lending company is very well protected in case of an accident. Credit unions are one of the best places to get second-hand car loans. If you plan to finance a used vehicle because you can’t afford a brand new one, or you just do not want to spend a lot of money in a property that easily depreciates, you will need to look for the best lender that offers the best interest rate as possible.
The credit union
The credit union knows everything about your credit history, so you will get a better-personalized approach when it comes to banking. If you have a few bad records on your credit history, talking to one of the representatives in your credit union will help you get a better interest rate deal.
They are also more pleasant to deal with compared to most care dealership salespeople. Not only that, when we are talking about interest rates, credit unions offer much better and lower rates. There are other alternatives besides credit unions. While they are one of your best options for an auto loan, if you are not a member, you may want to look for other alternatives. Here are some alternatives:
Online car loans
There are tons of options besides credit unions (click here if you want to find out more) that can offer you fixed loan rates. Some sites search the internet all the top loan that are available from different lending organizations and present them on a simple and clean page. Most of them are free and takes just a few minutes to get in touch with a representative.
Peer-to-Peer car loans
Investors or individuals offer this kind of loan instead of the traditional bank or lending organization. One advantage of this loan is that, if the borrower can’t make a payment, the car (which is the collateral) will not be repossessed. But because of this, your credit rating will take a massive hit instead, so you are not off the hook. You can also check out the dealerships if you have cash on hand instead of being restricted to specific models or makes.