Beyond the Ride: 3 Financial Benefits of Auto Loans
Auto Loans as a Path to Financial Responsibility
For many people, buying a car and obtaining an auto loan is their first major purchase and an introduction to responsible money management habits. Choosing a car you can actually afford, budgeting properly, and making on-time payments each month on your auto loan is the key to financial success and building a trustworthy credit report for future financing needs. Fortunately, there are additional benefits of auto loans that buyers should take into consideration when thinking about an auto loan. Here are some of those benefits.
3 Financial Benefits of Auto Loans
1: Build a Positive Credit History
When we apply for an auto loan, credit card, or any other type of financing, our purchasing power is directly related to our credit score. Making on-time auto loan payments each month is a sure way to build or strengthen your credit history, which is important for your future borrowing power.
2: Open Doors to Future Lending Opportunities
When we have a record of paying our debts on time, we become more creditworthy and are given benefits that can save money on future purchases with better lending opportunities. Having a good credit history of on-time payments can open the door to better interest rates and financing terms on everything from mortgages, personal loans, and new auto loans in the future.
3: Auto Loans for Debt Consolidation
A savvy way to consolidate debts and lower your monthly payment is to utilize an auto loan for the consolidation of high-interest debts. If you own a vehicle that's less than 10 years old and has equity in it, you may be able to use it as collateral to obtain an auto loan as a means to consolidate debts at a lower interest rate. This is a smart money move because you're actually consolidating the debt into a single, more affordable payment that helps you reduce and better manage your debt.
If you would like to find out if you qualify for a low-interest rate auto loan for consolidating debts, contact us today!
Considerations When Using Auto Loans Beyond Car Purchases
Although auto loans are made specifically for car purchases, there are occasions where there may be more available loan money than the car costs. This may qualify you for a cash-out refinance of your auto loan. If you have made on-time payments for a few years on your auto loan, but the interest rate is not the best, cash-out refinancing at a lower rate will not only save you money paid on interest, but you may get some extra cash, too. For example, if you have paid your auto loan for 2 years and the car is worth $20,000, with a loan balance of $15,000, your lender may approve a $17,000 auto loan, which leaves you $2,000 cash to pay down other debt. Be aware though that your car is being used as collateral, and the car could still be in danger of repossession if the auto loan is not paid properly according to the loan terms.
Manage Auto Loan Payments Wisely
Successfully managing your auto loan includes proper budgeting so that you can make payments on time each month. The key to success is to make sure you purchase a car you can afford. Make it a point to consider all of your monthly expenses when obtaining an auto loan. Don’t forget to include gas, insurance, and maintenance of the vehicle, too. Many times, people are excited to buy a flashy new car that really isn’t in their budget. This will lead to late payments and bad credit ratings. Staying within your monthly payment budget is crucial for maintaining your good credit history and rating.
Get the Most out of Your Auto Loans with Allegiance
When you choose an auto loan from Allegiance, you're not just financing a vehicle; you're investing in a smoother, more affordable journey on the road to your dreams. Enjoy competitive rates, flexible terms, and personalized service that puts you first. Your next adventure awaits!