5 Auto Loan Myths Debunked
Before shopping for a vehicle, it may be time to brush up on those car buying facts. We've collected five common auto loan myths and debunked them--so you can focus on getting the right vehicle that fits your needs instead of worrying about the loan.
Myth #1: I have bad or no credit, so I won’t qualify for an auto loan.
Although it’s always worth improving your credit score before financing a car, sometimes, buying a car is unavoidable.
Don’t get stuck with financing from a shady dealer or the equivalent of a payday lender with an insanely high interest rate. Credit unions can help. Credit unions like Together Credit Union return profits to members in the form of lower interest rates, which is a win-win for everyone.
Myth #2: Applying for an auto loan will hurt my credit.
Okay, so there is a little bit of truth to this, but it’s not exactly what you think. When you make several different credit inquiries, it does signal risk to lenders. Even if you shop for financing at two or three different financial institutions, the score often only takes it into account one time.
This is different from applying for a mortgage, credit card, and auto loan all at once, which would hit your score. Plus, just because your score dips a couple of points when you apply for an auto loan doesn’t mean bad news for your credit. In fact, when you make your auto loan payments on time, your score will likely go up anyway!
Myth #3: I have to finance the entire cost of the car.
You can finance the entire cost of the vehicle, but it’s not required. If you have money saved for a down payment towards your next car purchase, that’s great! Making a down payment can help with your overall monthly payments and decrease how much you need to borrow from the lender overall.
Myth #4: I’m stuck in an auto loan with a bad interest rate for the whole life of the loan.
Nope! If your credit score improves or rates drop, you can always refinance your auto loan.
Myth #5: It’s harder to get a loan for used cars than new cars.
While rates vary between new and used auto loans, it doesn’t mean it’s hard to get a loan for a used car. It can be difficult to determine the value of a much older model year car versus a more recent year, but most dealerships and financial institutions have the resources available to determine the value of a used car.
Let us help with a stress-free car buying experience
Getting preapproved for a car loan can take a huge stress off your shoulders when you’re at the dealership or searching online for the vehicle that’s right for you—it tells you how much can afford, and helps avoid high-interest car dealership rates.
