The lending process, in all the industries including Automotive, is complicated and nuanced. What informs lenders decisions regarding approval, payment, and interest is often difficult to pin down. Broadly, one could say that applicants’ credit scores have the biggest effect on such decisions.
Often times, loan recipients find themselves locked into less than perfect lending agreements due to their poor credit. This is a problem, especially given that in the Canadian used car industry, roughly 82% of purchases are financed at least to some extent by loans.
Loans written for recipients with poor credit typically feature the least friendly timelines and rates, holding people hostage in debt for an unnecessarily extensive part of their lives. For many, refinancing is the only hope, and as Canadian used car owners endeavor to build their credit, the benefits of refinancing expand. So, here are the reasons why refinancing as you build your credit, can relax the strains of your auto loan debt.
First of all, what exactly is refinancing? Essentially, it’s when you take out a loan… to pay off a loan… WHOA! Talk about Loan-ception! When you refinance an auto loan, the vehicle in question will always be used as collateral, securing repayment for the lender.
Refinanced loans will have fixed interest rates and a fixed payment schedule for a certain period of time following the refinancing process. Essentially, you’re doubling down when you refinance. You’re upping the ante, as it were, in the hopes that you can repaint the structure of your loan more in your favor. In Canada, the general decline of national credit combined with the general increase of sales by the Canadian used car industry means that many Canadians stand to gain quite a bit by refinancing. It’s risky, but can often improve your financial position, especially as your credit score improves.
For many, obtaining good credit can be difficult and slow. A lot of the time, consumers’ only recourse is to take out an auto loan when their credit still isn’t where they want it to be. Across the country, credit scores have trended downward as of late. This means that most Canadians purchasing used cars are doing so with loans written under less than friendly conditions. Lenders extend the worst rates and payment schedules to the people with the worst credit. This is a way for them to secure repayment, despite the applicant’s poor repayment history. Their thought process is, if they’re going to take a risk by approving an under qualified applicant, then the applicant should pay them more for doing so. But what if your credit score dramatically improves between you receiving financing and repaying it? This is when refinancing becomes a saving grace.
Ridetime is one of Canada’s premiere used car dealers when it comes to managing customer financing. Ridetime works with a host of lenders, throughout the payment process, to ensure that their customers are educated and receiving the best rates they can get. Thus, Ridetime knows a thing or two about the refinancing process, and can help guide its customers through it.
As your credit improves, so to do the rates you can expect to receive on a loan. So by taking out a new loan, under your now superior credit, to pay off a loan you took out when your credit was worse means that you can wind up paying less for the same amount of financing.
You’re rewriting the rules of the deal back in your favor! Your negotiating position has improved and your payment plan should reflect that. Refinancing is the way that borrowers can come back to the negotiating table and try to secure a more manageable situation for themselves. This is why it’s absolutely essential to refinance as your credit score improves. Because you work hard to rebuild the credit you have, and shouldn’t be punished for the way things used to be.
Again, Ridetime understands this and is here to guide you through the financing and refinancing process. Our network of lenders almost guarantee approval for employed Canadians, with a valid driver’s license, making at least $1500 a month. If you meet these criteria, regardless of your credit, then approval is well within your reach. However, should you then rebuild your credit and want to obtain better rates for yourself, Ridetime is eager to help you refinance and get your situation back on track.