The Bureau of Transport Statistics in 2008 reported that Americans owned 137,079,843 passenger vehicles or a little less than one car for every two persons. As the statistics continue to increase, it’s now undeniable that car financing and refinancing auto loans will be vital factors to help customers acquire the cars of their dreams. Both means empower consumers on their vehicle purchase by providing flexible and affordable resources to buy cars.
What’s the difference?
Auto financing is an outright loan taken for the purpose of buying a vehicle. The loan could either be from taking a personal loan, a direct car loan, or through getting a second mortgage on your property. A refinancing auto loan is essentially closing out one car loan to get another in order to pay lower monthly rates.
Which loan should a consumer apply for?
It depends on the consumer’s needs. For instance, if you have yet to buy a vehicle, you can apply for auto financing. Refinancing as the term suggests is option only available to those with an existing car loan already.
How practical is a car loan?
Many people would argue that since it is a loan, consumers who apply for it may end up getting burdened with payments. Unlike buying clothes or shoes for example, a vehicle will cost thousands of dollars in outright payment if you do not secure financing arrangements. When this happens, you place all your money in one investment and may not have enough anymore for other expenses. With financing means available, you can still have money left for emergency or other household needs. Such loan can also help you establish credit history you would later need if you decide to invest in a residential or business property.
Is a refinancing option practical?
It’s sensible because this allows clients financial flexibility. Consider this: if you’re paying $250 each month for a car and you suddenly have the option to pay only half, wouldn’t this free you from more worries? The money you save can be used for buying other necessities or you can even save it for rainy days.
What are the prerequisites for both deals?
Auto financing usually requires a client to submit pertinent documents such as identification papers, credit rating report, and proof of income. The customer submits all these along with an accomplished application form which will be examined by the approving company. If all goes well, then you can have the car you want.
In refinancing auto loan, the prerequisites may be slightly different. The company approving the loan may need to determine the current market value of the vehicle before they require relevant documents. For instance, if the balance owed on the loan is higher than the vehicle’s current value, the lending firm has the right to disregard the loan application immediately.
Both auto financing and refinancing bind loan applicants into legal financial obligations once the loan is approved. Borrowers are reminded to ensure the payment schedule is regularly complied with and other monetary requirements are settled within the agreed period stated in the contract.