One of the best things about an auto auction is you can now buy great-looking vehicles with clean titles and excellent mileage for a very low price. We are talking about cost savings of as much as 50% to even 90%! This means you do have the option to purchase the car without having to secure a loan.
Nevertheless, it is still best to prequalify yourself a loan for a variety of reasons:
- Sometimes bidding prices can go up, which means your personal funds may not be enough to cover the entire cost.
- It may be better to pay perhaps $300 a month for a car loan over a period of several months than to spend more than $3,000 in one day.
- You want to build your credit history. Because most cars in auctions are cheap, you are more likely to repay the car loan quickly and promptly.
- You want reassurance that you can certainly buy the vehicle you want.
How to Secure a Loan
There are many ways to get auto financing. Many tend to overlook their families and friends, for example. What is awesome about this option is almost always you are not charged with interest, so you still save some money. The downside is that you can be more complacent and be less accountable with the repayments. That can put a strain into your personal relationship.
The most practical way to secure auto financing is to approach your bank. To do that, consider these steps:
- Know the requirements. To pre-qualify or even be pre-approved for a loan, you need to have a good credit score, at least 600. If you do not have an excellent score yet, build it up before you consider financing. Betting on a bad credit auto loan is not a good idea as you may be charged with a very high interest and short payment terms. Other requirements can include income and assets that you may use as collateral.
- Compare lenders. The goal is not to find the easiest lending process but the most sensible. Compare interest rates, repayment terms, and the amount they can extend to you. Do not forget to take note of other fees associated with the loan. This can reduce the actual amount you can get from the loan or increase your car repayments.
- Know how soon you can get the loan. When you are planning to join an auction, time is of the essence. You want to make sure that the money is easy to access if ever you win in an auction.
- Use the amount as your basis in making a bid. Before you head to the auction, you should already have a good idea how much you are willing to spend for a vehicle. There is no use in bidding more than you can afford. It defeats the purpose of cost savings.
Note: if you want to pay less for auto financing, obtain a loan for the insufficient amount only.