Buying a Car: Cash or a Car Loan?

Cash vs. Car Loan - When you decide to buy a car, one of the main decisions that you will need to make is related to the mode of finance. You can buy a car with your cash or with a car loan. Learn why a car loan will be a better choice when you look at the bigger picture.

Do you have a substantial amount of savings? Or have you received a large amount of money in the form of a gift? Do you want to use to buy a car? Many people believe that buying a car with cash is a good thing because it helps them to avoid car loans.

What are the Benefits of Buying a Car with Cash?

·         You can get rid of making regular monthly payments.

·         You do not have to worry about obtaining low-interest rates.

·         You do not have to pay the interest rate for a depreciating asset (car).

·         You do not have to worry about repossession.

·         You can sell your car quickly.

There are multiple benefits of buying a car with cash. But, is it advisable to do so?

Should you buy a Car with Cash?

Buying a car with cash is an option for those car buyers who have cash. Today, an average new car costs $33,560 and an average used car costs $15,900. An average American doesn’t have that much cash in hand to buy a car. Even if you have cash available, you should consider obtaining a car loan.

Why consider a Car Loan for buying a Car?

It is advisable to assume the responsibility of a car loan because of the following reasons:

·   A Chance to buy a Better Car

Cars are expensive and if your funds can only allow you to buy an older car, you could end up with a high maintenance vehicle. On the other hand, you can use your money for making down payment and buy a new car. Also, remember that making down payment of a substantial amount will reduce your loan amount as well as the interest amount.

·   A Chance to improve your Credit Score

Even if you are capable of buying a new car with cash, it is advisable to opt for a car loan. The reason is simple. Buying a car with cash will have zero impact on your credit score. Alternatively, regular payments on your car loan will improve your credit score and enable you to qualify for better interest rates in the future.

·   A Chance to buy Any Other Thing

If you use your cash for buying a car, you will not be able to use it to buy any other important thing such as a house. Instead, you can put your money into a savings account and use it to make down payment while buying a house in the future.

·   A Chance to safeguard your Future

Instead of spending your cash on a depreciating asset like a car, you can invest it and safeguard your future. You can opt for long-term investment and obtain 6-8% returns. When you compare the returns to 3-4% interest rate on the car loan, you will realize that choosing a car loan is the lucrative option.

Car loans have a terrible reputation because people tend to misuse them. If you took care of the loan responsibly and made regular payments, you will realize that a car loan will benefit you and help you buy the car of your dream.

Remember to always look at the bigger picture!

All the best!

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The “Lender Problem” - Meaning, Reason and Ways of overcoming it

Mr. Smith was in a hurry to reach his office, but his car would not start. He checked the engine and concluded that there was no mechanical problem with the car. Suddenly, he realized that it was the "Lender Problem."

What is the "Lender Problem"?

A car is suffering from the "Lender Problem" if the lender has disabled it because of the following reasons:

>> Car driver was falling behind on payments

>> The car was leaving the pre-approved driving area

How do Lenders disable a Car?

Lenders use a GPS-based device called ignition kill switch to stop a car from running. The device is a simple starter-interrupt switch that allows the lender to immobilize a car from a distance. He can simply use a computer or a smartphone to stop the car.

How are Car Drivers reacting to the Device?

Lenders have installed the device in approximately two million vehicles. The ignition kill switch has left car drivers outraged because it raises serious privacy questions. Following are the few problems caused to car drivers because of the ignition kill switch:

>> One Texan woman's car was disabled by the lender when she left the pre-approved driving area. She was not going on a trip or a vacation but leaving to seek protection at a shelter for battered (assaulted) women.

>> Bolender family of Las Vegas faced the same problem when they had to take their daughter to the hospital. The car would not start because the lender had disabled it.

Why are Lenders installing the Device in Cars?

Lenders give the following reasons for installing the device:

>> It provides security

>> It makes repossession easy

>> It reduces the risk and enables lenders to provide loans to people with very bad credit score

>> Many investors demand it from lenders as it increases the safety of their investment

Even though car drivers are feeling insecure with the installation of ignition kill switches in their cars, lenders claim that they don't disable the car without prior warning. If a car driver doesn't make payments after repeated warnings, only then the lenders make use of the device.

What if the Lender wants to install the Device in your Car?

If you have a sub-prime credit score, your lender may insist on installing an ignition kill switch in your car. But, before you agree to the installation, check whether the use of the device is legal in your state. For example, Wisconsin has banned its use. You must also apply with other lenders to check whether you can avail an auto loan without installing any device in your car.

If you have no other option but to agree to the installation, you must discuss the following things with the lender:

>> In what circumstances will he disable your car?

>> How many warnings will be given before disabling your car?

>> Will you be permitted to take your car out of the pre-approved driving area during emergency?

How to overcome the "Lender Problem" successfully?

Even if the lender installs the ignition kill switch in your car, you can avoid the "Lender Problem" by staying on top of payments. You can make regular payments by undertaking the following pre-loan application tasks:

>> Calculate car budget and ascertain a monthly payment amount

>> Make down payment to make your payments affordable

>> Save money to make payments in rainy days

So, this is how you can overcome the "Lender Problem" and drive your car without any worry.

Fast Auto Loan Approval will help you in getting quick auto loan approval at affordable rates. The company is a leader of the sub-prime auto financing market and will make sure that you get the best bad credit no money down car loan program at lowest rates. Apply now.

Don’t become a Loan Delinquent – Use these Tips and stay on Top of your Bad Credit Auto Loan

Automakers were able to sell16.5 million automobiles in July 2014 because of auto loans, particularly bad credit auto loans. But, there is a negative side to this phenomenon. The auto loan delinquency rate is also rising with the increase in bad credit car loan approvals.

According to Experian Automotive, the 60-day loan delinquency rate has increased to 0.62% of borrowers from last year’s rate of 0.58%. It means there is an increase of $859 million in the balance of delinquent loans since Q2 of 2013.Also, there is a minor increase in 30-day delinquency rate. It grew to 2.39% from 2.38% meaning $2.8 billion increase from the previous year.

One thing is clear from this data that even though lenders are offering easy approval on bad credit auto loans, it is becoming a bit difficult for sub-prime borrowers in handling the loan. It is because people are taking advantage of the relaxed lending norms without considering their financial situation. If you are thinking of obtaining a bad credit auto loan, you must consider these tips:

Your Need or Your Desire

Do you really need a car? Is it something that is necessary to sustain and improve your life or is it just a craving? It is very important to differentiate between your needs and desires. Don’t apply for a bad credit auto financing program if you don’t need it. There is no need to assume unnecessary financial burden because it can cause harm to your credit score.

Calculate your Savings

Before searching for a car, you must sit down and calculate your savings. If you know about your total savings, you can use it for any unexpected future expenses. This way any unanticipated problem or expense won’t create any trouble in making repayments in the future.

Detoxify your Home

It may seem like a weird advice, but it is very useful. By detoxifying your home, I mean getting rid of unwanted things. Sell them on ebay or any other reputed website. You can even organize a yard sale and raise money for down payment. Trading your old car is also a good way of removing junk and reducing the car loan amount.

Planning your Financials
 

When you take a bad credit car loan, you accept the responsibility of making regular payments. So, it is important to prepare for payments beforehand. If your loan term is going to be five years, plan for the entire term. Know your expenses and increase your income if you are planning for a wedding or a vacation during the loan term. It will help you in staying on top of your payments.

Many lenders will offer you quick bad credit auto financing, but you have to repay it for getting better rates in the future. You have to make sure that you don’t fall behind on payments because it will increase the chances of repossession and pose great risk to your credit score. So, follow these tips before submitting your car loan application.

Remember to look before you leap!