Can a High Interest Car Loan Be a Good Thing?
Since you’ve learned about money, you’ve probably been instructed to pay as little interest as possible. You’re bombarded with car ads advertising no-interest car financing or nearly non-existent rates. But you’re new to the credit game or have had credit trouble in the past, so you don’t qualify for those low rates. You know this because you’ve tried! All you qualify for is a high interest car loan. That’s not a good thing… right?
Maybe it is, and here’s why:
It Provides a Starting Point for Credit
Certainly, a high interest car loan is not ideal. You’d like to pay as little extra money to the bank for its services as you can. However, a high interest rate can provide the jumpstart you need to get your credit rating moving in the right direction.
You must be careful with this starting point, though. If you end up missing or skipping payments on your loan, it could be quite some time before another financial institution will take a chance on you.
It Teaches Financial Responsibility
If you’ve had excellent interest rates in the past and weren’t diligent to keep your credit in good standing, you might need this wakeup call. Borrowing money for a car loan is a privilege that can be abused. If that’s been the case in your past, a high interest car loan can be the second chance you need to start walking a straight line credit-wise.
It’s NOT a Denied Application
High interest rates aren’t something that will make you happy, but it beats the alternative: not being able to buy a car. A denied application is the result when your credit rating won’t support a car loan at all.
Keep in mind that high interest rates are an indicator that your credit isn’t what it could be. Pay special attention to improve your credit score wherever you can. Reduce the amount of money you have borrowed, make your payments on time every time, and pay off your credit cards and maintain low balances.
A High Interest Car Loan is Still a Car Loan
If you’ve been approved for a car loan with a high interest rate, you’re still going to be driving instead of riding the bus, taking a taxi, or walking. A car loan is still a car loan at this point, and that’s a good thing.
If you are diligent with your credit – not just your car loan but ALL your credit sources – you may be able to refinance your car loan down the road at a lower rate.
If you’ve been searching for a car loan in Kansas City, check out CarUP KC. We’re the best choice for car loans no matter what your credit rating is like. We’ll do our best to get you the lowest rate possible. If the best you can do is a high interest car loan, we’ll make it as painless as possible with a great vehicle at a great price.