Buying a used car can be an effective way to avoid the rapid depreciation that comes with buying a new car. If you want to buy a used car, you may need to get financing to help with the purchase. Qualifying for a used car loan requires you to meet certain guidelines.
Used Car Loan Differences
Getting a used car loan is similar to getting a loan for a new car, but a few key differences are evident. One of the differences between a new and used car loan is in the term. Most of the time, a new car loan will give you a longer term to borrow the money. Another difference is the interest rate. With a used car, the interest rate will usually be higher than that for a new car loan.
Credit Requirements
One of the most important factors in getting loan approval for a used car loan is your credit score. The lender wants to verify that you have a high credit score before approving your loan. Each lender has different requirements for credit scores. For example, if you have a score above 700, you should qualify for a loan. If your score is lower, you might not qualify or you may have to pay a higher interest rate.
Down Payment
To get a used car loan, you may have to come up with a down payment -- which tends to increase as your credit score goes down. If you have poor credit, the lender wants a larger down payment from you. If you can come up with a large amount of cash, loan approval for a used car is much easier than if you have no money for a down payment.
Employment Verification
When you apply for used car loan, the lender usually will verify your employment. The lender wants to know that you have the money to make your car payment every month. If you do not have steady employment, you may not qualify for a loan. The lender may call your employer to verify your employment and how much money you make. At that point, if you meet the other credit requirements, you should qualify for a loan.
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