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The Subtle Line Between Car Loans And Credit Scores

The Subtle Line Between Car Loans And Credit Scores

Like it or not, your credit score will eventually determine the interest rates of your car loan. Such has been the case for a long time. It may still be the case for a long time to come for pretty much obvious reasons. Car loan lenders simply view borrowers with low scores as high risks. To protect themselves should the borrower default, they charge high interest rates. That is basically the thin line that separates affordable car loans and expensive ones. But there is much more into the same subject than what meets the eye.

Impact of car loan on your credit

This may sound confusing or even obvious to some. Anytime you take a car loan, your credit will be affected. It does not end there. Pay your loan on time and you certainly will have a good score. Make a mistake and miss out on a payment even once and you certainly will have yourself to blame. The bottom line here is, car loans and credit scores complement each other. To avoid defaults, always go for what you can afford. Car loan experts always advice borrowers to consider going for used cars instead of new ones. For starters, they always come along with affordable price tags. Repaying a loan for such a car will of course be easy as compared to repaying a loan for a new car.

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Loan on top of loans

It so happens that car loan lenders are always on the lookout for borrowers with high credit scores. They easily convince. This is not a bad thing. What is bad however, is going for a loan from a different lender while you have another loan at hand to service. Make no mistake about it. At first, it always seems as though one can manage to service two loans at a go. With a good income, that is possible. But it is risky. You can easily end up in debt. service one loan at a time and save your credit.

Car Renting vs Car Ownership: Which One Wins?

Car Renting vs Car Ownership: Which One Wins?

On the face of it, the answer seems obvious – car ownership. A deeper look into the question can however, bring forth a different answer. Truth is, it depends with one’s situation. Think about it this way. You are always on the move from one state to another because of the nature of your job. Your finances can’t allow you to finance a car. As a matter of fact, you have a poor credit score. You want to buy a car but you are scared that you will have to finance the car with a car loan which you may end up defaulting and worsen you credit score.

The situation above may seem or sound like a farfetched analogy. It is not. There is also the fact that the ever increasing gas prices, the ever uncertain auto insurance industry and stringent loan terms for people with low credit scores make the prospect of owning a car really hard. In fact, all these setbacks make the prospect of buying a car just that – a prospect. The wise thing to do here is to respect your budget. Rent a car for some time. It is more or less like a hand to mouth kind of scenario. Rent for the long term though as you will get discounts. This will give you time to settle your debts and work on them. With time, your credit score will have improved significantly. You can then apply for a car loan and finance a used or even a new car with ease.

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Then there is the couple situation. The thought of renting a car here may not be appealing. It may in fact be a bad idea. You can work on a joint ownership concept and finance a car. This can happen even when one of you has an unimpressive credit score. The bottom line as far as car ownership and renting is concerned is the fact that it all boils down to one’s situation. Analyze yours well, then go for what suits the moment without hurting your pockets.