Buying a used car offers many advantages, not least of which is a lower sticker price on your preferred model. From sidestepping steep depreciation to finding a reliable certified preowned model, purchasing a used car can save you some serious cash.
But even when you choose used, you might need a loan to pay for the vehicle, especially if it's a late-model car. Banks, credit unions, auto dealerships and online lenders all offer used car loans. To find the best loan for you, it's important to understand what each of these lenders has to offer.
Used Car Loans From a Bank or Credit Union
Before you start shopping for a used car, it's a good idea to get preapproved for an auto loan from a bank or credit union. If you know what kind of car you want, use online resources such as Edmunds or Kelley Blue Book to research average costs. With a price range in mind, you can tell the lender how much you want to borrow.
After the lender reviews your preliminary application, they'll tell you how much you can borrow and the interest rate they're likely to offer. This isn't a firm guarantee, but it gives you a good idea of how much a loan will cost you and makes it easier to negotiate with the dealer. A loan preapproval results in a soft inquiry on your credit report, which does not affect credit scores.
Banks may be the first place you think of for getting a used car loan. But if you belong to a credit union, are new to credit or have fair to poor credit, there could be advantages to applying for a loan at a credit union instead.
You may have a better chance of being approved for a loan. Credit unions are community-focused and smaller than many banks, so they take a more personal approach and are typically more understanding than banks if you have less-than-perfect credit or a limited credit history.
Unlock the Benefits of Used Car Loans
Purchasing a used car is a smart financial move, offering savings and reliability. When you opt for a preowned vehicle, you might need financing, even for a late-model car. Different lenders are ready to assist, but understanding your options is key.
Bank or Credit Union: Preapproval
Before diving into the used car market, consider seeking preapproval for a bank or credit union auto loan. Research your desired car's average cost through tools like Edmunds or Kelley Blue Book. Armed with a price range, share your borrowing needs with the lender.
Once your preliminary application is assessed, the lender will provide an estimate of your borrowing capacity and the likely interest rate. While not a final commitment, it offers clarity on potential loan costs and aids negotiations with the dealer. Importantly, this preapproval is a soft inquiry, which has no impact on your credit score.
Banks might be the initial choice for used car loans, but credit unions offer unique benefits. Credit unions prioritize community and often provide more personalized and lenient loan options, particularly if your credit history is limited or less than stellar.
Discover the financing options that work best for you and unlock the world of used car opportunities.
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