How Should I Finance My Car? Cash or an Auto Loan?
A Credit Article Contributed by Annie Bauers
I Have the Cash to Pay for a Car I Want but Most Say I Should Secure an Auto Loan Why?
It is not wise to pay cash for everything your credit will benefit from an auto loan. The reason is that if you pay cash for a large purchase like an auto it will not show up on your credit. This therefore can not benefit your credit rating.
You should secure an auto loan and save your cash. You can use the cash to make your monthly auto loan payments. This will be very helpful and increase your credit rating. If you are able to make all of your auto loans on time it will increase your credit score. Even though you have the cash to buy a car outright in the future you may want to buy a house or a business and the auto loan will help you get a loan for these larger investments.
Will an Auto Loan Help My Credit?
yes, an auto loan, if paid on time, can only benefit your credit. Actually auto loans are a very good way to build credit. This is because each payment you make is reported to one of the three credit bureaus; Equifax, Experion or TransUnion. these reports will add points to your overall credit score. If all of your payments for the auto loan are made on time you can add a lot of points to your score.
The higher your credit score is increases chances for a larger loan in the future. If you wish to purchase a home or a business or even another car your credit score is very important. If you make all of your auto loan payments on time this is a good way to help your credit.
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If I Put a Large down Payment on My Auto Loan Will That Help My Credit?
Yes because your payments will be less. An auto loan helps your credit not because of the amount of the loan but because of timely payments. If you are able to put a larger down payment towards your auto loan you will be able to secure a loan with a smaller monthly payment. This smaller payment will make it easier for you to make all of your monthly auto loan payments on time. By making your auto loan payments on time you will increase your credit score.
If you are able to put a large down payment on your auto loan it can only benefit you and your credit. In addition you should shop around for the lowest interest rate you can secure. A lower interest rate will also decrease your monthly auto loan payment.
An auto loan is an excellent way to help your credit and increase your credit score. Be sure to make all of your payments on time to avoid late payments and negative reports to your credit. A large down payment will help you do this because it lowers the payment.
