My friend Dan recently bought a new car (well new to him) 2010 Nissan Versa Hatchback. Something I recommended to him was that he look at refinancing his used car loan with some local Credit Unions around Baltimore. “You can probably get a much better rate” is what I said when checking the loan rates on websites of some local Credit Unions. Dan glanced at the used car rates on my smartphone and replied, “Nah, I don't believe it! I've have never seen used car rates that low.”
Dan's response really surprised me! First he wasn't really aware of what a credit union was. As well he skepticism about the rates surprised. Well obviously his rate may vary from what was listed on the websites, are people really so skeptical and unaware about the benefits of a credit union?
First let me explain what a Credit Union is for those don't know. Credit Unions are a non-profit banking entities that are owned by members and not shareholders. The object of a Credit Union is to benefit members with better localized personal service, better loan rates and products all with the same services a big bank would offer. All you have to do to become a member is open a Savings Account and fund it with a minimum deposit of $10 (some credit unions will vary). Some credit unions are based around a specific group, such as a postal or police union, or geographic area. Over the years many Credit Unions have opened up membership to a wider array of people though.
Credit Unions typically offer better car loan financing when compared to traditional banks. Dan told me his loan rate from the dealership was just above 6%, which I thought that was pretty good. Dan has a good credit score and a good driving record. Checking the used car loan rates at various Credit Unions around Baltimore seem to be around 2.8%-4% depending on your credit score. I was pretty sure Dan could have gone into any credit union and bee quoted a refinance rate of around 3%, which for what he paid would have been a lot of money.
If Credit Unions sound to good to be true, they aren't. They just offer better rates with better service. In my opinion they are the best car shopping secret out there!
So next time you are in the market for a new or used car, I highly recommend you look into joining a local credit union for a better loan rate. I am sure you will be pleasantly surprised.
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Bad Credit Score Doesn’t Have to Stand Between You and Your Dream Car
There is no better feeling than having a hot new car, ready to ride in your very own garage. However, with car prices still high, and the economy still in bad shape achieving the goal of new car ownership is not very wallet-friendly. On the other hand, when you set your mind on your new must-have vehicle, you don’t have to stop pursuing it just because of the price tag or your credit score. With some knowledge about car financing, you can have your car on your driveway while staying well within your financial limits.
DOs and DON’Ts of Car Financing
Car financing is the art of purchasing a car by borrowing money from banks or other sources. It is the ultimate solution that demolishes the distance between your garage and your new car. It grants you the purchasing capacity even in a very tight budget
To gain the freedom to buy the car of your desire, there are several DO’s and DON’Ts that you have to keep strictly in mind before and throughout the whole process of car financing as they will enable you to get the best car finance rates even with a with a bad credit history.
Do Research the Amount of Money to be BorrowedBefore applying for car finance, do some homework and determine the exact amount that you will require. It will enable you to determine the additional costs that the dealer is imposing in the form of hidden interest rates and additional costs at the time of car financing.
Do Pre-determination of the Loan Repayment Schedule Make a draft schedule for repayment, be precise about the schedule and the total time period of the loan. Keeping in mind your desired repayment time period will play a significant role in selecting the best plan during the car financing process.
Do Know Your Budget and Stay Within its Limits Always be within your budget limits, exceeding the budget limit will throw a curse of bad credit score on you. For avoiding this tremendous curse, pre-determine the budget precisely and choose the car within its limits.
Do Find Out Your Credit ScoreThere are numerous credit score calculators online; use them and find out your credit score. Your credit score history will be researched thoroughly during the whole process, and it is very good to know the facts upfront.
Do some simulations and prepare possible scenarios It is not as technical as it sounds. All you need to do is to jump on the car finance calculator and input the amounts related to your car loan, such as car’s price, desired interest rates, and down payment, and find out the simulated results. It will give you a taste of the general loan amount that you will have to pay per month for the specified car.
The above DOs will greatly broaden your with regard to car finance, but in order to make your purchase as smooth as possible, there are DON’Ts to be kept in mind, as well.
Don’t Disclose Your Monthly Payment Capacity The dealer would try every sugar-coated tactic to make you disclose your monthly payment capacity, but at this point you need to be focused on the total amount of the loan and then afterwards determining the monthly payment schedule. If you somehow disclose your monthly payment capacity, there is a greater possibility that you will lose your chance of getting a lower purchase price at lower interest rates.
Don’t Let the Dealer Determine Your Credit ScoreBefore approaching the dealer, you should know your credit score (as mentioned earlier in the “DOs” section of this sheet). If you don’t know your credit score, the dealer can tell you almost anything, and you would have to believe them, and proceed with the loan according to the credit score provided.
Don’t Go for the Most Expensive CarNever exceed the limits of your budget, always remain within it. However, if you choose to do so, it will only result in rolling the negative equity forward to your upcoming deals or it might even downgrade your credit score. Negative equity means the difference between the amount you own to the borrower for the car and the car’s total price.
Don’t Accept to Finance Additional Options for Your CarYou generally don't need the add-ons, such as extended warranties, fabric protection, rust protection. Most new cars come with these things nowadays anyway. Simply refuse to get or finance the add-ons, when the dealer offers to add them to your existing borrowing amount; you will save yourself a significant amount of money.
Along with all the above mentioned DOs and DON’TS, there is a common fear related to bad credit score that exists among many borrowers. However, there is no need for that fear to get between you and your dream car, because you can get car loans with a bad credit history from many sources easily. All you need to do is to stay calm during the complete process of car financing and thoroughly follow the tips provided. As a result, you can drive your dream car into the New Year with the best car finance rates and without the hazards of car financing.
Car buying is on a new upswing. Reuters recently reported that overall car buying (new and used) has risen drastically in the past 4 years. Car sales rose 13 percent to 1,188,865 cars and light trucks sold during the month of September at U.S. auto dealerships. That was the best month since March 2008, just after the start of the recession and this shows promise for the auto industry.
The upswing is mainly due to rising consumer confidence, making people feel safer to open their wallets on car purchases. However, many Americans are still feeling the tight with their money in this economy as it is still moving at a snail's pace. That's why more people are considering used cars over new cars these days. If you are one of these people here are “5 Tips for Buying a Used Car.”
Preparation is Key
Preparation is crucial in a used car buying search. Spending time researching different models and trims can help you get a better price and know what car fits your needs. The internet offers a wealth of information about used cars – learn about the different models, options, reliability, prices, etc. The more you know the better, the better prepared you are to find the car you want and get a good deal.
Check Your Credit
If you're a used car buyer with potential credit issues who might find it difficult in getting approved for a loan, again turn to the internet to better educate yourself. Better yet, you should probably know your credit rating in advance, so the entire discussion about financing and credit isn't a surprise to you.
I recommend you look for a reputable credit union that will offer great financing for pre-owned and used vehicles at reasonable rates. Credit unions offer much better financing than what you will find at a bank all with personalized service. Credit unions actually offer the same loan rates on new cars as used cars, making them straightforward and easy to understand. They can also help you improve your credit and some even offer classes on financial literary.
Do the Numbers
When seeking a used car, know what your budget is and where it will be a year from now. Don’t shop for a cool luxury convertible car if you’re living on a shoestring budget, try to find a reasonable and sensible small car that will be easy and not expensive to maintain and insure.
Most used car buyers try to manage a down payment of about 20 percent, while financing the rest. But don't let that get away from you either. I don't recommending financing a car for more than four years (48 months), and it is a good idea to keep your monthly payment lower than 10 percent of your total income.
You can find great tools online to figure out what a reasonable monthly car payment is for you. It's best to pay for the car as much upfront as you can but most will need to borrow a little money.
Get the Car Checked
You NEED to get any used car you are considering buying checked and inspected by a reputable independent mechanic BEFORE you buy it. Unless you are a gearhead, like me, and know what to look for in used cars it's not a good idea to just take a dealership or individuals word on the history of a car.
Did you know that there is no law requiring body shops to report work they have done on vehicles they work on? A friend's dad is master painter and bodyman and he can make any vehicle that has been in a serious accident look new again. Meaning Carfax reports can be completely clean, but not tell the whole story about the car.
Eyes that know what to look for will be able to see if a car has been in an accident or if it needs any mechanical fixed to be road-worthy. Having a used car checked out before you buy it is very important.
Watch for Trade Ins
Most used car dealers will ask if you're trading in a car for the new/used car you've got your eye on. You want to be careful about talking with the dealership about this. Trade-in talk shouldn't enter into the negotiation process in my opinion. Smart used car buyers consider trade-in cars as a separate transaction, and as such don't mention a trade-in factor into the conversation until the end. Also you will likely get more for your used car if you sold it online via Craigslist or other local ad listing service or website. Did you know that dealerships typically make a killing on used car trade-ins and not much on selling new cars? One of dealerships dirty little secrets! To be sure you are getting a good deal utilize sites like ClearBook.com which assess the value of your used car for the approximate trade-in value. You will find you typically won't get a good deal.
So don't fret if you are a first-time used car buyer or don't have the best credit rating in the world. There are plenty of great tools to help you and you should always be looking for opportunities to buy if you are in the market for a new car. Ask friends, family, and neighbors if they know of any good used cars for sale. If you have any questions about buying a used car please leave a comment below.