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Mon, Jun 19th - 12:35PM

Think Long Term before you decide on your Auto Loan Term

Life is a journey! And, buying a car will make your journey easier. Nevertheless, before you buy a car, selecting the right loan term is important. If you choose a short-term auto loan, you will have to repay the loan over a short period. The term varies between one to three years. On the other hand, a long-term auto loan has additional time for repayment. The term varies between three to nine years. It is good to know the pros and cons of the auto loan term before you sign the contract. Take time for making comparisons and make the decision process a little easier. It is essential because you have think about the big picture.

Short-Term Auto Loan - Pay more for a Short Period

Pay up Faster and Make Way for your Dream Car

Buying a new car is a costly purchase. You need an auto loan to pay for the price of the car. Short-term auto loans usually have a lower annual percentage rate. Remember, the shorter term the better it is for you. Short term guarantees you lower interest rates and higher monthly payments than a longer loan term. It means you will pay up the auto loan with a low rate of interest. There are several benefits of opting for a shorter loan term such as:

>>You can enjoy low interest rates.
>>You can get out of the auto loan debt in a short period.
>>The biggest benefit is that it helps in freeing up your money quickly!
>>It feels expensive at first, but with low interest rates, it will not hurt your financial situation.
>>The car will have a higher re-sale value when you pay off the auto loan quickly.
>>It can aid in improving your credit score.

As a car buyer, remember that a short-term auto loan offers you multiple advantages only when you make large monthly payments. In addition, you will have to do everything to reduce the loan amount. It will ensure that the monthly payments do not become a burden for you. Consider, making a large down payment to the lender. Also, remember to plan your expenses because auto loan payments will take an important chunk of your income and you will not be able to save money for the next couple of months.

Long-Term Auto Loan lets you buy an Expensive car

If you are thinking of buying a luxurious car, a long-term auto loan will be a good option for you. It is possible to afford the car expenses because monthly payments are low. The lenders will offer you affordable monthly payments in return of high interest rates. It means you can even buy a car outside your price range. Many car buyers opt for a long-term auto loan because:

1. It offers low monthly payments.
2. A car buyer with low income can afford a car easily.
3. It is ideal if you want to buy a luxurious car.
4. Regular monthly payments can increase your credit score.

However, you must remember that long-term auto loan stretches the monthly payments for a long time. In addition, you will have to cough up high interest rates to enjoy a longer loan term. Another problem is that you can be an upside down situation for a larger part of the term. It is a very risky situation because if the car breaks down, you will find it very difficult to buy a new one.

When in Great Confusion, Read the Conclusion!

There is no perfect auto loan term. As everyone has different income levels and repayment capacity, there is no one perfect loan term. When the lender offers you an auto loan term, do not be in a hurry. Determine the monthly payment that suits your household budget. Consider your future expenses. Think of major expenses such as a wedding, college fees, buying a house, etc. Pick the auto loan term accordingly. Remember, life is too short for making monthly payments for a very long time. Therefore, it is important to think hard before you make the right decision.

When you set out to buy a car, you must consider an auto loan with full scrutiny. It is essential to work with a trusted bad credit auto financing company to ensure a stress-free loan process. With FastAutoLoanApproval.com, you will be able to select a comfortable loan term for your car. Contact the company for availing no cosigner car loans and make car buying pleasurable.


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Mon, Jun 12th - 11:42AM

Debt-to-Income Ratio: Play it Safe to score Approval on the Auto Loan

You have one life, play it safe and you wonít regret!


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What is Debt-to-Income Ratio?

Many people think that their good credit score will get them approval on the auto loan. But, while a personís credit score is important, the lender also considers the debt-to-income ratio. If you donít like playing it safe which means your monthly expenses or debt obligations exceed the amount you earn, the lender may not approve your auto loan application.

The debt-to-income ratio, also known as DTI, refers to how much debt you have in comparison to your income. It is an important number for lenders because it helps them to determine your ability to pay back debts. The simple fact is that a good DTI also has a huge impact on getting you fast approval on auto loan.

How to calculate DTI?

The DTI ratio is a percentage and it is comprised of the total minimum monthly debt divided by the gross monthly income. The total minimum monthly debt is made up of minimum monthly payments for auto loans, student loans, credit card debt, mortgages, and any other recurring debt that you might have.

For example, if you pay $1,500 a month for your mortgage, $100 every month for an auto loan and $400 per month for the rest of your debts, you pay a total of $2,000 per month toward debts. If your gross monthly income is $6,000, then the DTI ratio is 33%.

Rule of Thumb

The lower the DTI, the better it is for you. The higher the DTI, the more likely you are to struggle to make your monthly auto loan payments. Youíll want to lower the DTI ratio not only to qualify for the auto loan, but also to ensure that youíre able to make the monthly payments tension-free.

What if the DTI isnít to your liking?

Youíve got two options, both of which are easier said than done. Your first option is to increase your income so you have more money to work with. Your second option is to reduce your debts to enable your existing income to go further. For the second option, focus on paying off your current debt and avoid taking on additional debts.

Types of DTI

There are two types of debt-to-income ratios that lenders look at:

Front-End DTI Ratio, which shows how much of your income goes toward expenses.

Back-End DTI Ratio, which shows how much of your income goes toward expenses as well as your monthly debt obligations.

So, which one matters the most?

Ideally, both the DTI ratios should be as low as possible. A lower DTI will complement your credit score and allow you to get a lower interest rate on auto loan.

Consider the fact: Lenders donít know you. They canít determine whether you will be able to repay the auto loan amount in future. Instead, they look at the DTI and know about your ability to make monthly auto loan payments. So, play it safe and avoid messing up your DTI.

When it comes to buying a car, it is better to be safe than sorry! Plan the car buying process and apply for an auto loan with Fast Auto Loan Approval. Enjoy a swift car purchase with no money down auto loans. Apply now for getting the low income auto loan deal today.


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