Having a car to your name these days has become a necessity. People cannot rely on public transport as much as they used back in the day. Nowadays people want mobility and flexibility when it comes to traveling, going to work, to the grocery store, etc. and private cars enable that.
But, one of the biggest problems that all of us face is the price of the car. Too often, people don’t have the amount required for a car and they search for solutions. The most common solution is taking an auto loan. The sum can sometimes be big and this is a serious decision, which is why we decided to name a few things that you should know before applying for one.
Co-Signers and Co-Borrowers
Sometimes people are not able to be approved for an auto loan for a reason that we will explain later on in this article. In these cases, lenders might suggest to get yourself a co-borrower or a co-signer. These two terms are unknown to many people who want to get an auto loan, which is why we decided to explain them a bit.
Even though co-borrowers and co-signers share the responsibility of the debt and lenders take their credit history, income, and a few other factors into consideration, there are some differences between them. The main thing that splits them is the following: a co-signer is someone who takes the guarantee of the loan for someone who isn’t able to qualify. The co-signer can repay the debt if the borrower is unable to keep up with the payments.
A co-borrower, on the other hand, has the same responsibility of paying the debt off, but the difference is that he/she has the same level of ownership over the car as the borrower. The names of the borrower and co-borrower are displayed on the loan and have the same status. Co-signers and co-borrowers have several other differences and if you want to want to read them, click here.
Your Credit Score
The main reason why people get their application denied is their bad credit score. A good credit score is achieved by keeping up with monthly payments on other loans, paying the bills, and having a good wager. If you want to increase your chances of being accepted, you must make sure that your credit score is positive.
Of course, there is another option and it’s called bad credit loans and they are designed for people who cannot maintain a good score at the moment. But, as you may know, the interest rates are way higher and you might end up returning a far greater amount than the one you got.
Getting The Best Rate For Car Insurance
This is a must have and an expense you need to work into your monthly budget. Keep in mind, when buying a car with a loan you will need to have liability, comprehensive and collision. Plus, you will need to list the lender’s name and address on your policy – your agent can take care of this with no problem.
A quick and easy way to save money on your insurance premiums, when shopping for a car, look for a four door, 2 wheel drive, non-sports car type of vehicle. The best way to know what you’re truly getting into is to call an insurance agent for a quote on about 3 different types of cars – this way there are no surprises and you can make an educated purchase.
The Amount That You Need
One of the general things to consider when taking an auto loan, or any other loan for that matter, is the amount that you need. With an auto loan, the first factor that determines your amount is whether you should buy a new or used car. There are certain pros and cons to both types of cars.
Buying a new car will come at a much higher cost, but the state of the car will be much better and the chances are that you will be able to use it for a longer period. Furthermore, if you decide to sell it at some point, it is most likely that the price will be much higher than if you are selling an already used car.
On the flip side of the coin, used cars can be in great condition and cost much less and can provide you with an equally good experience.