All Credit Types Welcome and Car Financing Terms to Know
Posted Friday, Mar 17, 2023
Have you ever encountered a car financing website that shows off an "all credit types welcome" tagline as soon as you land? If you have ever wondered what this meant, you are not alone. In fact, you are in the same boat as countless other people hoping to buy a car this year.
Even if you have gotten that initial search for the perfect car out of the way, you may still have a long way to go. You must find a car financing option that corresponds with your credit score, then put down a sufficient down payment and analyze the APR.
If you feel like all these terms make your head spin with confusion, the following sections can help you learn more;
You will encounter some common terms as soon as you choose a car. Dealers use these common terms to speak to their clients about car financing options. They include;
1. APR
This is an abbreviation for "annual percentage rate" and can also be called interest rate by most dealers. It is the percentage applicable to your loan payment (an amount you borrowed for your car purchase). It is applied annually to cover the cost of borrowing the money.
2. Auto Loan
An auto loan is a loan for car financing in case you cannot pay all the money in cash upfront. Auto loans can be received from dealerships or banks, depending on your preferred option. Some dealerships have an "all credit types welcome" policy that provides an easier auto loan option to those with bad credit histories.
Auto loans usually have an APR, a predefined percentage of interest you need to pay on the total loan.
3. Down Payment
The down payment is one of the most important parts of the car financing process, as the more down payment you provide to the dealer, the smaller your loan and the lower the APR. This means you can pay significantly fewer installments in the coming years.
A down payment is a fixed amount you pay the dealer in cash upfront. It also includes rebates.
4. Loan Term
Have you ever been advised to carefully browse the loan terms before agreeing to anything? It means you need to check how long you will be paying off the loan. Loan terms can range from 48 to 96 months, depending on the price of the vehicle. However, the shorter the term, the more beneficial it is for you.
5. Late Payment
Late payments are exactly what they sound like. It is when you have not provided your loan payments on time. Late payments can result in late fees, and the more fees you accumulate, the worse the effect on your credit history.
6. Credit History
Your credit history, which contains a credit score, must be great before you apply for car financing options. A good credit score is considered 750 or more, while a bad credit score is any score below 600. However, this doesn't mean you won't be able to get a loan without a great credit history. You can get away with bad credit at a dealership with an "all credit types welcome" policy!
7. Upside Down
This is where you are stuck between a rock and a hard place. You have that car but are struggling to keep up with the payments.
The upside down doesn't refer to the alternate dimension in Stranger Things. However, it can be just as scary. If you are upside down on your car loan, it means that you owe more auto loan than the value of your car. If you stay upside down and end up losing the car to a crash, you would still need to pay the loan amount. Try to get out of the upside-down as soon as you can!
8. Equity
This term is often used to describe the difference between the market value of the car and how much loan you still need to pay. If the amount is positive, it would mean that you can get a much better deal on the next car. However, if negative, you will need to pay the loan balance before you can trade it off.
9. Co-signer
This term is important for those exploring an "all credit types welcome" policy. If you have bad credit and can't seem to find good car financing options, you can rely on a co-signer. If you can't qualify for a loan because you cannot guarantee repayment, a co-signer can help you provide that guarantee.
Co-signers usually have better credit histories and can sign your loan documents to ensure you meet the loan terms. They will be expected to uphold the agreements if you can't pay.
Many steps exist between missing a payment and losing your assets. The first step is delinquency, whereby you miss a payment due date. Your lender might provide you with regular reminders and usually get you extensions. However, this won't always be the case.
Make sure you submit these payments on time, as late payment fees and other penalties can significantly increase your expenses.
10. Repossession
Repossession is a legal consequence of failing to submit your payments on time. Since your asset is the first guarantee that can be seized when you cannot meet loan requirements, you must avoid late payments. However, usually, multiple warnings are provided in advance.
Repossession might not be able to result in the fulfillment of the loan terms. You or your co-signer might be responsible if the car cannot get the value.
Final Thoughts
An all-credit types welcome deal cannot save you from the requirements of car loans. Thus, car financing options should be chosen considering your long-term expenses. This can help you make the payments on time and avoid any last-minute disappointments. At The Internet Car Lot, we don't discriminate between good and bad credit history. All credit types are welcome! If you are searching for quality cars, apply today!
