By Q4 2019, the auto loan delinquency rate in the United States has reached a nearly eight-year high. It has been on the rise since 2016, suggesting that car payments have gotten low on the list of priorities of more and more Americans.
If you must own a vehicle in Texas, you ought to exercise due diligence to find an auto loan in Wichita Falls, Electra, or Iowa Park that suits your financial situation best. To avoid being late on your car payments, check the tips below:
Take Out a Loan Directly
Statistically, indirect auto loan borrowers are more likely to default on their bills than their direct counterparts. Indirect financing is another term for dealer financing, where a car buyer can seek funding in-house.
Why more indirect borrowers have fallen into arrears on their auto loan payments? Probably, they did not get sound advice. Maybe the salespeople they spoke with focused more on the monthly payment instead of the interest rate, which is generally marked up significantly to bring more money into the business.
Although some third-party lenders proactively control the conversation to boost their profits rather than explore ways where borrowers could save cash, shopping around could at least give you an idea about the interest rates different lenders are willing to offer. The more information you know, the better you could narrow down favorable loan options.
Do Not Borrow More Than What You Can Afford
Qualifying for a loan does not necessarily mean you could afford that car you want. Be realistic with your financial capacity to put yourself in a good position to pay your bills more punctually.
Getting low interest could save you more money overall, but stretching the term of your loan could help make your payments more manageable.
Pledge a Security
Choosing an unsecured auto loan comes with a moral hazard of not being afraid enough to observe punctual payment. If you know you that your vehicle will not be repossessed even if you are past due chronically, you will have less incentive to settle your monthly bill on time.
Using your vehicle as collateral can help keep you reliable as a car loan payer. Plus, your asset could make you more eligible for a lower interest.
Build as Much Equity as You Can From the Start
There is a ton of merit in paying a large down payment, trading in your old vehicle, or both. Any of the said options allows you have to plenty of car equity from the beginning.
Having sizable equity before you drive your new vehicle into your garage will not only enable you to refinance your loan in the future but also help you borrow less funds to make a purchase. Borrowing less will lower your monthly payments and may qualify you for a more favorable interest rate.
More often than not, not everything is set in stone in auto financing. Do not hesitate to voice out the deal that you that think you could qualify for. The only thing you could lose if you do not negotiate is the opportunity to snag a more affordable car loan and lower your chance of getting delinquent.