Purchasing a new vehicle is a major decision, especially when you need to secure a loan in order to do so. Not only are you shopping for a car, you’re also shopping for the best interest rate and loan agreement terms. This process can be even more difficult if you have poor credit.
Negative credit history can make it more difficult to find an agreement with reasonable interest rates and can also make it more challenging to get your application approved. It’s important to prepare and research ahead of time before you make a decision to ensure that you choose the best option for your situation.
A loan agreement that isn’t ideal for your financial situation increases the risk of vehicle repossession. In an auto loan agreement, the vehicle that you purchase is considered collateral. Collateral acts as protection for the lender. If a borrower fails to make payments under the loan agreement, the lender has the right to repossess the vehicle. A repossession will further harm your credit and negatively impact your history for up to seven and a half years.
Follow these steps before you secure a loan and purchase your new vehicle, and avoid car repossession by making loan payments in full and on time.