Five Financing Myths: Debunked
Myth: I have bad/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 American Eagle return profits to members in the form of lower interest rates, which is something from which everyone can benefit.
Myth: 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: I have to finance the entire cost of the car.
This is simply not true, and in fact, putting money down helps you tremendously when it comes to your monthly payment.
Myth: I’m stuck in an auto loan with a bad interest rate for the whole life of the loan.
Short answer: No. If your credit score improves or rates drop, refinance your loan at a local credit union.
Myth: It’s harder to get a loan for used cars than new cars.
Again, not true. While rates vary between new auto loans 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.
Do you have any questions about auto loans? It’s worth asking us before you shop. Do you “C.U.” confused by any myths? We’d love to help. Comment your questions below!