Posts tagged ‘0% auto financing’

Common requirements for 0% auto loans

As interest rates of most car loans are in constant rise, dealerships began promoting 0% auto loans to attract customers to buy their cars. This type of loan has literally zero interest rates attached to it. These loans are attractive since car buyers have the chance to buy their cars through loans with payment terms similar to buying vehicles on cash basis. However, this type of loan has stricter requirements such as the following:

Higher credit score

While most average loans requires a credit score of 650 or higher, a 0% auto loan applicant needs to have a credit score higher than this. Most lenders require a loan applicant to possess a credit score of at least 680 to qualify for 0% auto loans. For luxury car buyers, the credit score requirement for 0% auto loans is at least 700 or 720 making this type of loan out of average car buyers reach.

Larger down payment

Since these loans don

Top car loan types

Car loans are one of the convenient ways to buy a car. There are many types of car loans offered by lenders. They differ in terms of the interest rates involved and the manner of payments involved. These top car loan types are the following:

1. Straight Auto Loan
This is considered as the common car loan. In order to get this type of loan, you need to approach a car dealer and fill out an application form. To get a better loan deal you need to have a high credit score, down payment, and the source of funds to pay for the amount you owed.
The source of funds to pay for the borrowed amount refers to your employment and other business. It is advisable to bring along a proof of employment and valid IDs when applying for this type of loan.

2. Auto Equity Loans
This loan allows you to apply for loan to buy the car. The car then serves as the collateral for the amount you owe from a lender. Most of the time, lenders also accepts houses as collaterals. This gives the lender an assurance that you would pay the borrowed amount.
These loans are beneficial yet these pose greater risks. It is therefore important to determine your ability to pay for the auto equity loan for it may result to outcomes such as losing the car or house in case you fail to pay the borrowed amount.

3. Auto Refinance Loans
An auto refinance loan provides you the option to obtain a loan from a second lender. The second loan is used to pay for the first one. This allows you to reduce the monthly payments and the loan

How zero interest financing works

Zero interest financing might sound good but it also has its own downsides. This might cause some troubles with the loans you have. In order to avoid these things, you need to know how zero interest financing works by reading the things below.

1. Zero Interest Financing is designed for specific customers

Only a limited number of individuals are able to qualify for a zero interest financing. Lending institutions provide tough rules in selecting those who can avail this type of loan. A pre-requisite requirement for this is the above average capability. Only 5% of the total number of applicants gets to qualify on this. In addition to this, applicants should also possess a credit score of 750 or high better.

2. Zero interest financing has shorter pay-back period

This type of financing is offered with shorter pay-back period requirement. This is because the 0% interest set-up requires that the payment obligations must be completed within a period with 2 years as the maximum. This is the main reason why this kind of loan prioritizes above average income earners. High income earners are most likely capable of paying the loan

0% Auto Financing

0% auto financing means an auto dealership will give a car-buyer an auto loan without interest. While there is usually a down payment involved, the buyer will not have to pay interest on the amount borrowed. That’s right: 0% auto financing will provide a loan free of interest payments. This could seem like a great deal. But buyers need to know when zero percent financing works for their benefit and when it works against it.

Why zero percent auto financing is difficult to get: credit scores and loans.

Zero percent car financing is difficult to acquire because it’s usually offered to such a thin slice of qualified buyers. In order to qualify for any car loan, even one with zero percent, a borrower needs to have a good credit score. Only buyers with nearly spotless credit ratings can qualify. And even those buyers with some very slight tarnish on their credit scores could be refused.

Select vehicles and options often erase the 0% financing option.

Zero percent loans are only often offered as a financing option for the dealer’s choice of vehicle. Slower-moving vehicles are often tagged with the 0% financing incentive to move cars off the lot. This works fine for people looking for vehicles that aren’t selling well. But for buyers looking to buy a more popular vehicle, or for those searching for specific vehicle options, zero percent financing may not apply. While a dealer may be happy to provide someone looking for a car with, say, leather seats instead of cloth seats, the loan that previously didn’t have any interest may suddenly find itself coming with interest charges.

0% loans often discredits manufacturer’s rebates.

Auto dealers will often offer a 0% percent option to attract potential buyers to a dealership. When a buyer looks to capitalize on a manufacturer’s rebate as well as the 0% financing, the dealer tells her it’s one or the other. But this can sometimes work to the benefit of some borrowers. If your credit score doesn’t qualify you for the 0% auto financing, you can search out the manufacturer’s rebate and still save yourself money.

Zero percent auto financing can sometimes be more expensive than interest-charging loans.

Depending on the interest rate and a borrower’s qualifications, an interest-bearing loan can sometimes be more affordable on a month to month basis than options offering zero percent financing. Often, a dealership will offer a zero percent auto loan for a much shorter term than a typical, interest bearing loan. This quickened repayment schedule will cost the borrower more each month than a traditional, longer interest bearing loan. Let’s use an example. Say the loan amount for a new car is $20,000. Through a typical interest bearing account, and ignoring any down payment, a buyer would stand to pay off the loan in about 72 months. At 6.75% on the loan, the buyer would pay about $296.53 each month. With a zero percent auto financing option, that same buyer would need to make her payments in a far shorter period of time. Let’s say bout 36 months, which is typical for zero percent auto financing. Those $20,000 would cost our zero percent buyer $555.56 each and every month.

Apply for other types of auto loans.