Car Financing in Phoenix: Affordable Vehicle Title Loans in Arizona
Few things compare to the excitement of shopping for something new, especially if it is a car.
While purchasing a new vehicle comes with the thrill of a functional and reliable automobile, it also comes with the worry of getting an cheap auto loan that covers the costs.
Luckily, the marketplace is evolving, and you can find affordable auto title loans almost anywhere. The key is to find the best car financing option that matches your budget and provides you with enough money to purchase a good car.
So, how do you find the best places to borrow money with a favorable average interest rate? The information below explores car financing deals, how to get affordable loans, and walk away with a vehicle, perhaps even from a local dealer.
Types of Car Financing
Car financing is paying for a vehicle over some time instead of buying it once through a cash payment. This type of purchase is practical and convenient.
Car financing lenders are individuals or institutions that provide the loan amount based on the buyer’s request and other factors. The most important thing most lenders consider is the credit score.
Most lenders only work with people who have favorable credit scores. This is because those with little or no credit are considered high-risk borrowers.
However, some lenders specialize in people with no or bad credit. They offer car loans at slightly higher interest rates and use other criteria besides credit to determine loan eligibility.
Explore more about the types of car financing for a new car.
Secured Auto Loans
Secured auto loans are a common type of car loan. Lenders provide these loans for new and used cars, securing them through a lien on the vehicle.
Banks and credit unions offer the traditional secured auto loan. The loan directly ties to the vehicle and will have the most attractive APR rates and terms.
However, the best interest rates often go to people with the best credit scores. Still, some banks and credit unions work with bad credit borrowers. But, the interest rates are usually higher. This type of loan usually has lower rates for new cars, while used cars have higher rates.
Another variation of secured auto loans is the balloon loan. It features a unique payment structure where you make small payments during the first few years and then a large and final payment at the end of the loan term. These loans also allow you to trade or sell the car to pay off the loan.
Unsecured Auto Loans
Personal and student loans are common types of unsecured loans. These loans do not restrict how the borrower should use the money. Instead, the lender provides the amount, and the borrower chooses to invest in vehicle purchase, making it an unsecured auto loan.
An unsecured loan means the lender cannot repossess the car if the buyer stops making payments. Instead, the lender reports the default to the major credit bureaus, thus affecting the borrower’s credit history.
Unsecured auto loans are ideal if you buy an affordable car with a price below the minimum for traditional bank financing.
Besides this, unsecured auto loans are best reserved for purchasing old or used cars that do not qualify as collateral for secured vehicle financing.
Simple Interest Loans
A simple interest loan calculates monthly payments using the interest rate, loan balance, and the daily interest accrued since the latest payment.
It is the most common car loan people use today. Every month, the payment goes toward interest, and then the remainder pays down the principal. So, by the end of the loan, you are mostly paying off the principal.
The loan specifics allow you to make additional payments on top of the monthly car payment. Therefore, you can pay off the loan early, thus saving on interest charges.
Precomputed Interest Loans
A pre-computed interest loan means that the lender calculates the interest amount over the loan term. The lender calculates the loan balance, interest, and other fees and divides it across the loan term.
Therefore, borrowers can have a fixed monthly payment and interest rate. It is a rigid repayment schedule where the monthly payments could be lower. In addition, there is no incentive to pay off the loan early.
If a borrower has late payment fees, the percentage of the payment going toward the principal may reduce to cover the penalty.
Direct Financing
Direct financing is obtaining a loan by interacting directly with a lender, such as a bank or credit union. Therefore, all communication is between the lender and borrower, with no intermediaries.
The best deals usually lie with banks and credit unions you already work with. The interest rate that the lender offers often depends on your credit score. However, some lenders consider other factors to grant the loan.
Indirect Financing
On the other hand, indirect financing uses a dealer to find a lender that can offer you a loan based on your credit rate and desired amount.
Therefore, loan applications must go through the dealer, saving you the time of finding a lender who will offer the ideal terms.
It is a convenient option for people with little to no credit. In addition, it has time-saving and convenience benefits since you can find local dealers almost anywhere. It is worth noting that working with a local dealer means additional costs for their services.
Buy Here Pay Here Loans
Buy here, pay here loans or BHPH loans are a good option for people with low credit scores. Low credit scores limit accessibility to regular auto financing options.
Besides offering the loan, BHPH dealerships provide access to vehicles so borrowers purchase the car all under one roof. These loans usually have a higher interest rate, which covers the risk the lender takes.
Peer to Peer Lending
Peer-to-peer lending is borrowing money from investors or individuals through lending platforms. You can enjoy competitive rates and flexible loan terms based on your credit score.
It is not an ideal option for people with low credit scores as it could translate to higher interest. In addition, the less-than-traditional financial structure poses high expenses in case of late or missed payments.
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Best Car Deals and Incentives
Buyers are looking for the best car deal, especially when purchasing a new vehicle. Luckily, many offers make buying the car more attractive.
Dealerships place these offers to boost sales of various models. In addition, they are also ideal for encouraging brand loyalty.
The incentives vary by region and change often because the best deals are not supposed to last long. New car buyers should, therefore, check the latest offers online before visiting a dealer.
The offers can be low or 0 APR internet rates for financing, cash rebates, and exclusive lease offers. Learn more about them below.
Types of Deals and Incentives
You are most likely to come across the following when looking for the best new car deals today:
Low-Interest Financing
Some dealerships and manufacturers offer special financing rates for new cars. They often provide lower-than-average interest rates where buyers secure a car loan with reduced interest charges.
Therefore, they can save on interest costs through the loan term. The primary benefit is lower monthly payments and overall interest costs, making the vehicle more affordable. Notably, the buyer must have a high credit score to qualify for such a deal.
Zero Percent APR Financing
As the name suggests, 0% APR financing means the buyer pays no interest on their car loan. Manufacturers or automakers are the ones that offer these loans. Therefore, they make money from the sale’s profit rather than interest.
When a manufacturer offers 0% APR financing, they are often trying to boost the sale of older vehicles to reduce their inventory and make room for newer models. In addition, they could run the offer to attract customers to a dealership.
It is worth noting that credit score is an important factor of qualification. However, the manufacturer or dealership usually decides their minimum requirement score.
Customer Cash
Customer cash is just a cash discount that the dealership or manufacturer takes off the price of a car. However, buyers usually have to meet certain requirements to receive the money.
For example, they may only be valid for college graduates, military personnel, veterans, and loyal customers. The primary benefit is saving cash, making the car purchase more affordable.
Special Lease Terms
Dealerships may offer lease deals with unique terms to encourage purchase. The most common is a lower down payment. Others include extended lease periods and reduced mileage limits. Dealers usually provide this offer because the vehicle’s estimated value will be high at the end of the lease.
Trade-In Bonuses
Lastly, dealerships may offer additional incentives for trading in a car when buying a new one. The dealership gives the buyer a bonus or offers a higher trade-in value for their current vehicle.
Therefore, the buyer enjoys savings on a new car purchase and the convenience of a smooth trade-in process.
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Common Mistakes to Avoid For A New Car Loan
Getting a Phoenix auto loan could be the last step to owning your dream car. But even as you seek the best car deals, remember that you could make costly mistakes.
From skipping on the down payment cars to failing to budget properly, these are all mistakes car buyers have made, interfering with an otherwise great deal. Learn more on how to avoid the various mistakes.
Failing to Compare Car Loan Lenders and Dealerships
Just like buying produce at the market, there is someone with a better deal or at least meets your budget. One of the mistakes you could make is failing to compare loan lenders and dealerships.
There are multiple lenders available for good and bad credit. Shopping around increases your chances of getting a good deal for the car and loan.
If you settle for the first lender and then discover someone else with a better deal, it feels like you got cheated. So, even with a poor credit score, always compare lenders and dealerships.
Going Beyond Your Budget
Making a budget ensures you get the best car deals without going into financial strain. Therefore, you must stick to the budget, especially if you have bad credit.
Going beyond your budget means you will struggle to make the monthly payment. Multiple missed or late payments damage credit scores. If you have bad credit, it will further affect your credit history, making it challenging to acquire loans in the future.
It is also worth noting that affording a vehicle is not just about the purchase price and interest rates. It is also about considering future costs such as gas, repairs, maintenance, and insurance. Ensure these are fees you can keep up with in the long run.
Failing to Make A Down Payment
Some lenders, especially those willing to work with bad credit car shoppers, do not require you to make a down payment.
While it is convenient if you need a car in a hurry with little credit, it is the makings of a shaky foundation. You will have higher overall costs if you ignore making the down payment.
It will feel like you are stuck in a never-ending payment cycle. In addition, it could mean longer loan terms, translating to a higher overall cost. Therefore, strive to make the down payment. In addition, ensure it is a higher amount if you can afford it.
Focusing Solely on Monthly Payments
Many borrowers fixate solely on monthly payments and fail to see the wider financial picture. Some buyers focus on how much they pay each month. They fail to consider that low monthly payments could mean extended loan term lengths and higher interest rates. Consider the broader picture, ensuring you spend the least or remain within your budget.
Skipping Loan Preapproval
If you are in the market for a new car through an auto loan, never skip the preapproval, especially if you have bad credit.
Getting pre-approved offers multiple benefits, starting with budgeting. It gives you the green light, telling you how much you can afford. So you can confidently negotiate with lenders.
In addition, preapproval gives you the freedom to compare loan offers from various sources. With this, you can find the best loans.
Overlooking Refinancing Options
While it is not a mistake, some buyers fail to monitor interest rates after securing the auto loan. You should consider refinancing the loan if the rates drop to secure a lower interest rate. It is a smart move that can reduce your monthly fees and overall costs.
Car Deals Make Auto Financing Worth It
With dedicated research and careful navigation, you can find an amazing car deal that makes an auto loan worth every penny. Understanding the valuable car deals and incentives from dealerships and manufacturers can be a game-changer.
Low-interest financing, cash back, zero-percent APR offers, and similar deals make your car dream more attainable. In addition, they offer valuable convenience.
The key to finding the best deals is thorough research through authoritative websites and legitimate car forums. Additionally, careful planning helps you avoid common mistakes, ensuring you walk away with a great deal in the long run.
Titan Auto Group is one of the leading BHPH dealerships, offering auto loans to everyone, especially those with bad credit. Contact us today for a great car deal.
