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buying a used car

4 Reasons to Choose a Short Term Car Loan

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When you don’t have the money to pay for a vehicle upfront, you’ll need to borrow money from someone, whether it be a family member, bank or credit union. Most people choose to finance their car purchase with an auto loan, as it’s fast, easy and offers consistent monthly payments. 

The most common auto loan length is 72 months (or six years) for both new and used vehicles. This length has increased over the years because of the rising cost of vehicles. The monthly payments are more affordable when spread over a period of six years compared to four years, though you will end up paying more in interest. 

If you are looking for the most economical option for your car purchase, you may benefit from a short-term loan. Even though the monthly payments are higher, the interest rates are lower, and you’ll be done with the loan much faster. 

Let’s look at why a short-term auto loan may make sense for you. 

1. Lower Interest Rates 

One of the best advantages of a short-term car loan is the lower interest rates. Since the loan term is shorter, lenders take less risk, which means they can charge less interest. The benefit to you is that you pay less interest over the life of the loan, saving significant money. 

2. Save Money in the Long Run 

To expand on the point above, you’ll save money on a short-term loan due to lower interest rates and a faster loan. Plus, you’ll own the car sooner. If you do run into problems with your car, you’ll have the money to fix it, or you can trade it in for something new. Things are more complicated when you still have a loan to pay off. 

3. Build Equity Faster 

A short-term car loan also allows you to build equity in your car faster. Equity is the difference between what you owe on your car and what it’s worth. With a shorter loan, you’ll pay more toward the principal balance each month, allowing you to build equity faster. This is a great option if you plan to only keep the car for a few years, and you can avoid being upside down on your loan. 

4. Flexibility

Short-term car loans also offer more flexibility than long-term car loans. With a shorter loan term, you have the option to pay off your loan faster, which can save you substantial money in interest. Additionally, a shorter term loan may give you extra options for refinancing your loan in the future, and you can save on insurance costs once you own the car outright. 

Shop for Repo Cars and Save Money 

If you want to save money on interest, build equity faster and have more flexibility in your payment options, a short-term loan may be right for you. When you look for repo vehicles on Repofinder.com, you have the option to secure financing in advance or work with one of our sellers – they are banks and credit unions themselves! It’s the best way to save money while still getting a great vehicle! 

financing for a car

Can I Get a Car Loan with Bad Credit?

Car loans are available for people with bad credit, but they typically have high interest rates. In an ideal world, you can work on building up your credit before purchasing a new car. However, this isn’t always possible. If you need a car now, you’ll have to bite the bullet and do so. 

Fortunately, there are some ways to get a better car loan, including shopping around and making a good-sized down payment. Below is more information on getting an auto loan with poor credit. 

Check Your Credit Score 

Claim a free copy of your credit reports. This way, you’ll know where your credit falls and the types of loans you’re eligible for. Generally speaking, a credit rating of 669 or less is considered fair or poor. If you don’t need a car immediately, we recommend working on bringing up your credit score. Things you can do include: 

  • Pay all your bills on time 
  • Reduce your debt as much as possible
  • Check your credit report for errors 
  • Have any inaccuracies removed from your report 

Research Different Auto Lenders 

If you can’t wait on a used car, you’ll need to find out what auto lenders serve people with lower credit scores. These lenders typically have higher interest rates but they can help you get the car you need in a pinch. Here’s a complete list of specific auto loans that are good for people with poor credit. 

Save for a Down Payment 

If you can put money down on your used car purchase, you can take out a smaller loan and pay less in interest overall. Plus, having a down payment can help you secure a loan easier as this is something that many lenders take into consideration when determining risk. 

Consider a Cosigner 

Another option that’s worth thinking about is adding a cosigner to the loan. If you have someone who is willing to do this, they can help you qualify for a better loan and interest rate. However, the cosigner is also assuming this risk, so make sure you’re prepared to make all the payments on time. Otherwise, their credit is at risk. 

Check with a Credit Union 

Credit unions are often willing to work with people who have bad credit. And, many credit unions sell vehicles they have repossessed from previous owners, which means one-stop-shopping for you. Check out the inventory from RepoFinder – the nation’s largest database of repo vehicles. Many credit unions sell their repo inventory at discounted prices and are willing to work with people who have low credit ratings.

As you can see, it is possible to get a car loan with bad credit. Try to give yourself time so that you can make the right decision for your needs and budget. Browse RepoFinder’s inventory and see the wide selection of sedans, pickups, crossovers, minivans, etc. that we have available through local credit unions.