If you’re planning on buying a used vehicle and want to know how to finance it, you’ll be surprised by the options you have. Planning ahead is a smart decision because it allows you to get the best rates. And, by running through a few different scenarios, you can determine exactly what fees to expect when making an auto purchase.
Below are the best options for financing a used vehicle and the benefits to expect with each one.
Used Car Loans
The most popular option for financing a used vehicle is a used car loan. Many car loans come from big banks like Bank of America, Wells Fargo, Capital One and Chase, but there are plenty of others out there, too. Large banks tend to have higher interest rates and fees, while smaller, brick-and-mortar branches are often more affordable.
To ensure you get the best car loan, it helps to do some research. Know your credit score, determine what you’re willing to spend each month and review different companies. By getting prequalified, you’ll be in a better position when it comes time to bid on a vehicle.
Credit unions can also finance your repo car purchase, just as the banks do. You will end up getting an auto loan with monthly payments, but you can expect a slightly different process. For instance, credit unions are not-for-profit and typically offer lower fees but higher interest rates. Their customer service tends to be above average as well.
Home Equity Loans
Used car loans aren’t the only way to pay for a car. If you have equity in your home and you can access it, you may use this money to purchase a vehicle. Home equity loans usually offer lower interest rates than standard auto loans, and you may even be able to write off a portion of the interest on your taxes.
Another option for financing your vehicle is a personal loan. Most personal loans have no restrictions on what you can use them for, giving you the freedom to buy any vehicle you want, including a repossessed luxury vehicle. However, there are things to watch for as well. For example, some personal loans have higher interest rates and additional loan fees compared to auto loans.
Peer-to-peer loan platforms allow you to borrow money from an investor. If you don’t qualify for traditional financing, or you don’t like the offers you are getting, this is an option worth checking out. The requirements are usually less strict compared to banks and credit unions, and the financing typically comes quickly. The loan amounts are usually low, but this won’t be a problem if you’re planning on buying an affordable repossession.
As you can see, there are many options for financing your repo car purchase. Repossessions are lower in price to begin with, so when you choose the right financing option, you can expect reasonable monthly payments that won’t break the bank.