Common auto financing alternatives

Auto financing alternatives provide more options on how to purchase the car. It is important to understand these options work in order to help you appropriate the best method in purchasing a vehicle. You can choose which option that could give you savings and determine those that are quite expensive. The most common auto financing alternatives are the following:

1. Home equity

Home equity allows car financing using your house as the collateral. The collateral provides lenders with security that you will pay for the loan. However, this type of loan is risky since the lender could foreclose the house in the event that you fail to make the payments. Home equity requires you to pay the loan faithfully. Make sure not to miss a single monthly payment to prevent further complications after the loan term ends.

2. Credit unions

Credit unions offer lower interest rates on the loans they provide. However, these rates are most of the time offered to credit union members. This simply means that you need to qualify for a credit union membership in order to take advantage of the competitive rates. This could save you larger amount of money all throughout the loan term.

3. Refinancing

Refinancing allows you to lower down the monthly payments and the interest rates. Refinancing is conducted by obtaining another loan from a second lender. The amount obtained from the second loan is used to pay the first loan’s remaining balance. You would then pay the second lender for the new amount owed.

4. Credit cards

Credit cards could also be used to finance a vehicle purchase. This is when the credit card you own has a higher credit limit. Payments using credit cards are paid through money transfer. This usually involves charges from the credit card company.

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