If you are in the market for a second car loan, knowing what options are available is important. While getting approved for two car loans may seem like an impossible feat, it's actually not that complicated. Here are some things to consider when taking out a second car loan and how to improve your chances of success.
What To Prepare for When Taking Out a Second Car Loan
When deciding whether to get a second car loan, you should know what to expect. Here are some things you should be ready for.
Additional Insurance Costs
One of the things you will have to consider is additional insurance costs. When you get a second car loan, factor in the cost of insuring both vehicles, whether you opt for increased liability limits and comprehensive and collision coverage.
Higher Scrutiny From Lenders
When you take out a car loan, your credit will be scrutinized more closely than when you applied for your first car loan. Some lenders look at borrowers’ credit situation in the most recent 36 months to determine whether they can qualify.
Difficulty Finding Additional Credit
Finding credit after securing your loan can be challenging. Experian reports that 30% of car loans are written for customers with a bad payment history, so going to bad credit car dealers with an existing loan may make it more difficult to find a second lender.
How To Improve Your Chances of Getting a Second Car Loan
If you're considering getting a second car loan, knowing your chances of getting one can be helpful. Here are some ways to improve your chances.
Pay Down Revolving Debt
The faster you pay off your revolving debt like credit and store cards, the better your chances of getting a car loan. The longer it takes to pay off that debt, the less money you have available for other things. When lenders see that you can make timely payments, they trust you more.
Make Repayments on Time
The easiest and most effective tip to improve your odds of getting a second car loan is to ensure you pay on time. Scheduling your payments on the same day of each month will help avoid late fees, so ensure they are timely transferred from your personal bank account.
Dispute Errors on Your Credit Report
If there’s an error on your credit report, you may want to file a dispute with the credit bureau and ask them to remove it. If the error is large enough, it can greatly impact your chances of getting approved for a car loan.
Lower Your Credit Card Balances
Pay off your high-interest credit card debt first. Then, open a new credit card and transfer as much of your balance as possible onto that card. Next, pay off that credit card every month, starting with minimum payments at first and then gradually increasing payments until you only pay the minimum amount due.
The bottom line is that having two bad credit car loans Alberta isn't bad. In fact, it can be a good thing if you use the right strategy for financing your cars. The key is to ensure that both loans have a low APR so that you don't end up paying more monthly money than necessary.