On the heals of the Bank of Canada’s decision to lower its main interest rate down to 0.75% from the 1% we’ve seen for a little while – many individuals have begun to question if it is the right time to take on more credit – a car loan being one of those queries sure to be on their minds. The answer to this question may actually have two possible answers. Let’s look at both perspectives and see which outcome may be the better option for you and your current financial situation.
A Car Loan: Now vs Later
First and foremost – perhaps the question you should ask yourself here is – can you handle more credit at this time? While some financial experts propose that this interest cut will allow for lower rates across a range of loan types, including mortgages to car loans – there also seems to be much more to this decision than just the lower rate. Based on your situation, if you already have high volumes of debt that you are struggling to manage – then perhaps despite this lowered rate – it might actually not be in your best interests to seek out a car loan.
While many loans are long-term commitments, it can be difficult to maintain them – especially if interest rates go up in the future. Instead, perhaps using these lower rates to pay down current debts may be the more suitable course of action for the time being. Once you have been able to pay off a good chuck of your outstanding debt, then pursuing a vehicle and the applicable financing may work out better in your favour.
Alternatively, should you still have debts that need to paid, yet still require a car loan sooner rather than later, then using the timing of this interest rate decrease to your advantage could prove to be a positive experience for you after all. Typically there are many good deals on cars at this time of year – as Spring arrives and new vehicle models are rolling in. These reduced prices in tandem with a lower interest rate, may allow you to find a manageable car loan that will not hurt your current debt levels too irrevocably.
With a car loan, you can actually begin to rebuild your credit score, by effectively meeting your monthly payments over time. As long as you remain committed to sticking to your car and other loan demands – you can keep your credit in a stable position – and not derail your score further. In this case, deciding to secure a car loan now while interest rates, based on a variety of loans are lower – could also help you improve your credit score and continue to juggle all of your payments.
Where to find a Car Loan?
Across Canada, there are many Car Loan companies whose services are designed with individuals with bad credit in mind. Through these organizations, there is typically a higher loan approval rate for individuals with lower credit scores, and therefore as a driver in need of a car – you do have options.
Wherever an alternative or traditional lender provides a loan to individuals with poor credit however, as a part of these loan agreements, often times the interest rates will be higher than for those with strong credit. With that being said, with the lower interest rate – this can definitely be an added benefit to those struggling with current credit issues. Overall, you are still likely to obtain a more favourable interest rate now, as opposed to before when interest rates were higher.
Ultimately, if you have poor credit and want to re-establish your credit rating, with lower interest rates on your side, then opting to pay off some of your debts prior to looking to secure your car loan could be a good decision. On the other hand, if you absolutely require a car loan now, it is nice to know that even with bad credit there are options for finding a loan that can meet your needs. Once again, this is a decision that needs to be examined from both angles. By weighing your loan options and the interest rates against your current financial stability and your present set of needs, this will help inform you of which is the more suitable outcome for you – a car loan now versus later.