Loan for Used Cars: Impact of Your Credit Report on Interest Rate Negotiation
by on 23 Jul, 2014 - 0 comments
Buying pre-owned or used cars instead of a new one is an excellent method of saving money. The value of new cars starts to reduce from the moment they are driven out off the store. When you buy a used car, it is the previous owner, who has to suffer the loss. The only place, where you might find new car having an upper hand, is the car loan deal. You should not expect impressive loan deals for used cars, which you get for new cars. Getting 0-percent down or cash-back incentives are highly unlikely for a used car purchase. However, considering the price is already low with pre-owned cars, you should not mind that. Again, there is a scope of saving money as well, if you negotiate the interest rates and terms of payment with the dealer.
Importance of Credit Report
To have a better scope for negotiation on your loan deal for used cars, you will find your credit score to be the first hurdle for you. Lenders make use of your credit score for determining whether or not you should be given the credit. At the same time, it helps them in finding out how much should they charge you for it (in terms of interest rates). To get a competitive interest rate, you should have a good credit score. You can have an idea on your current score for free by checking out the website of Federal Trade Commission. Once you are aware of your credit score, you should do everything in your hand to improve it. In the process, you will give yourself a better chance of getting a good deal.
Your lender will consider the below areas of your credit report before finalizing a loan deal on used cars with you:
Your payment history is one of the areas, where your lenders will have their eye closely on. They want to know how good you are in keeping up with your monthly payments. They want to know, if you will be able to keep up with your loan repayment or not. In case you have always been on top of your payments, you will have a good credit score. However, in case you have been late on a frequent basis, your credit score will get hurt. For a lender, you are going to become a riskier investment.
Other than timely payments, lenders also consider the amount of debt that you are carrying at that moment. They will analyze the balances and find out if you are a risk or not. If the addition of new monthly auto repayment is not going to leave a lot of room in your monthly earnings, do not expect any negotiation. However, if you will not be overextending yourself with the new auto loan, they will expect you to make consistent and timely payments. Henceforth, you will have an upper hand during negotiations.
Get a Negotiated Deal even with a Poor Credit Score
If you see that your credit score is not going to help you get a good deal, there is no reason to be disappointed, as you can still get a lucrative deal. All you need to do is ask an earning member of your family to cosign your loan for used cars. That way, you are highly likely to get a competitive rate from your lender.