Shopping for loans is never as much fun as it is to take a car for a test drive, but in order to afford a gently used or pre-owned car or truck you will usually need to go looking for a pre-owned loan. But there is no reason to worry in 2010, despite the doom and gloom of recent economic news. That’s because once you are equipped with some knowledge about how to get the best loans this year – and what constitutes the main difference between a bad loan, a good loan, and a really great loan – then you should have nothing to stress-out about.
Let’s start with the nuts and bolts of what you need to do in order to qualify for the best pre-owned loans on the 2010 market. Then after that we’ll touch on what to do if you aren’t in a position to meet those requirements so that you still have choices and opportunities to get pre-owned loans.
First, here’s what you need to get the premium quality loans that offer the lowest interest rates and the easiest, most user-friendly terms and conditions.
A Great Credit Score:
In today’s tight credit environment you will want to have a score in the high 600s or the 700s to get a good pre-owned car loan. If you are between 620 and 680 you’ll get a decent loan. Less than that you’ll have to pay more or you might even be denied a loan unless you go to a bad credit loan specialty company. But to get the best deals out there you should have a FICO number that is in the upper end of the scale – or above 700. Get up in the 750 range and they should roll out the red carpet and give you special loan incentives and discounted rates.
A Substantial Down Payment:
Having a nice down payment puts lenders at ease even more, because they know that you are offering them some real collateral that is worth cold cash no matter what may happen in the future. Combine your high FICO score with at least 20 percent down – or 25-30 percent if you can scrape it together – and you’ll be in fine shape to get a super loan even during these crazy and difficult economic times.
A Really Good Idea of What Vehicle You’re Buying:
Of course before a bank or lender gives you a loan they will want to know what kind of car or truck you are buying so that they can look it up in their handy blue book of used car values and figure out what it’s really worth. So bring as much detailed info as you can to the bank, including pictures and the date, model, and make of the vehicle. They may require an informal appraisal or send an expert to go look at the car, but that is just standard operating procedure for many lenders.
A Few Important Documents:
You’ll also want to have a file with you that includes copies of your latest tax return, your recent pay stubs, and recent bank account statements. Call the lender, ask them what they need to see, and then gather the papers before you go to visit them and it will make your pre-owned car loan application process go a whole lot faster.
Now if for one reason or another you aren’t in a good position to borrow, you can take steps to improve your borrowing power – like repairing your credit, saving up for a down payment, going shopping to nail down your choice of a specific used vehicle, or getting your paperwork in order.
But if your credit is seriously damaged, order a copy of your credit report and then sit down with a credit counselor or lender and come up with a practical strategy to get started raising your credit score. While you’re doing that try to set aside some cash for a bigger down payment, too, and soon you will be in a much better position to go apply for a pre-owned loan. You can also shop for your loan with a lender that specializes in loans to people with bad credit, or see if the car dealer has any special financing for people in your situation. One way or the other you will probably be able to find a loan for you and then go through with the pre-owned car purchase you’ve been planning for the New Year.
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Between the cash for clunkers program and desperate dealer incentives to promote car sales as major vehicle manufacturers struggled to avoid bankruptcy, the automotive consumer was the only real winner in terms of the 2009 auto industry. But as we celebrate a New Year – and the start of a brand new decade – with lots of lingering economic uncertainty, many people who are in the market for a car or truck want to know the outlook for auto loans in 2010.
While nobody has the benefit of a crystal ball, consumers should have much better success this year compared to last year when it comes to auto loans and vehicle purchases. Of course there are variables that nobody can possibly predict, but according to recent news reports there are some very compelling reasons to be optimistic about car loans.
Last year, for example, the global credit markets were still reeling from the aftershocks of the unprecedented financial meltdown that rattled banks and other financial institutions at the end of 2008. The future of the entire banking system was in jeopardy, it seemed, from 2008 through the first half of 2009. Banks and other lenders were paralyzed by excessive debt, borrower defaults, and an overall lack of cash with which to make auto loans. Meanwhile the automotive industry was in the midst of its own severe crisis, and the oldest and most reputable automobile manufacturers in American were collapsing – leaving dealerships in a panic.
Those factors created a double whammy for the auto loan niche of the credit market. On the one hand there was very little credit to go around among traditional banks. Meanwhile some of the biggest players in the auto loan industry – those lenders that are and on the other hand some of the biggest auto loan institutions owned by or affiliated with big automotive companies like GMC – were completely strapped for cash. The bottom line was that it got much harder to get a loan of any kind, and that included auto loans. So despite lots of deals and perks like the cash for clunkers program, many consumers still found it hard to get approved for their auto loans in 2009.
But now the business headlines are announcing that while interest rates are still historically low, consumers are finding more loan availability. The Boston Globe newspaper for example, recently ran a story explaining that easing of credit restrictions on auto loans is finally starting to inspire a surge in buying. The well respected Ward’s Automotive Group – which tracks data about the auto industry – reported that light vehicle sales rose approximately 20 percent this past December compared to the year before. Meanwhile the most recent data available on car loans from financial institutions shows that they are approving more loans, and that is especially true for consumers who have average or above-average credit.
As car companies and banks continue to see positive economic signs on the horizon – such as improved auto sales figures and fewer defaults, foreclosures, and bankruptcies – they will both gain the confidence to increase auto finance lending. That will, in turn, encourage buyers to take out more auto loans – so that a rosy economic outlook can potentially start a chain reaction by creating a cycle of improvement that just gets better and better.
But before we can put on our party hats and toast the end of the recession – and the full fledged return of credit in the form of easier and more affordable auto loans – the unemployment picture must first improve. Employment data is still a wild card, and while there are signs of economic improvement the employment outlook remains bleak. Recent news reports show a rather unpredictable hiring forecast, and it seems that just when we get some good news regarding labor and employment another statistic makes the headlines to deflate our enthusiasm. The President has vowed to make job creation a top priority in the coming months, however, and if the national unemployment rate backs away from double digits and starts to shrink, that will be good news for auto loans.
The reason that auto loan availability is tied to employment figures and other general economic data is that when people are working and earning, they are in a better position to repay their car loans in a timely fashion. That makes auto loans easier to get, and as lenders start to compete for your business, those auto loans also become more affordable.
So while the forecast for auto loans looks good so far, based on current news, keep an eye on the business pages. If other statistics also start to fall into place it could turn out to be a banner year for auto buying.
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