We all want the best in life, and each of us has something we aim to achieve. Whether it be a new car, a successful business, or simply insurance for our family, there is always something we want. However, not all of us possess the money or capital required for these things. This is because they can require a hefty sum of money. After all, we are all born into the world in different circumstances, and not everyone is fortunate enough. However, there are some ways that people can help elevate themselves to afford the things they need through hard work. The problem with this is it may end up taking a lot of time.
This is why taking loans or finance is an excellent option, as it allows you to buy your items instantly. You can then pay back your loan slowly with interest in a way that is affordable to you. However, many lenders may require decent credit to get a good loan with a reasonable interest rate. If you want to learn how to build credit or someone who has a bad credit score and needs to rectify it, we can help you out. Here’s how a car loan can help you build credit.
What happens to your credit when you get a car loan?
When you get a car loan initially, there is a temporary reduction in your credit. This is because you’re buying a car which is a huge debt you’re taking on. Additionally, when you’re getting a loan, a lender will make a credit check that will result in a slight reduction. In technical terms, this results in the addition of a hard inquiry on your credit report. This dip in credit is nothing to worry about and is completely normal. You can easily overcome this dip and can build upon it on the positive side. Before we get into how you can build your credit, it is first essential to learn the credit scoring model. Typically, it is the following:
- Payment History (35%)
- Amounts Owed (30%)
- Length of Credit History (15%)
- New Credit (10%)
- Types of Credit (10%)
This is the credit scoring model that most lenders will tend to use. If you’re not sure about your credit score after taking a loan, consider contacting any of the major credit bureaus. Now that you understand it, we will deep dive into how you can improve your credit score.
What are some ways you can increase your credit?
You help build up a positive score in several ways. These are:
- Making your payments on time. This is probably the best way you can build up a good credit score. This is because lenders will always prefer lending money to people who will pay it back on time. Remember how payment history has the biggest priority when we are talking about percentages. A higher credit score means you’re more trustable, which means lenders will be willing to provide bigger sums and better interest rates. If you pay back your car loan debt, this will positively add to your payment history, which is already worth 35% on the model.
- Having a credit mix, i.e., having a variety of different types of credit. The mix should be a healthy balance of installment credit (the car loan) and revolving credit (like credit cards). You should be able to manage all these credits successfully. If you have a lot of credit card debt, getting a car loan will probably be a good idea. After all, according to the model, a mix of credit is worth 10%.
- Having a long credit history will also positively affect your score as it will prove to lenders that you tend to pay any debts you incur on time. However, you should only take the car loan if you need to and know that you can repay it. The credit history part of the model is worth 15%.
On the other hand, here are some ways that your credit score can drop. Therefore, you should avoid these at all costs.
- Missing payments. If you miss a payment before your due date, the car you bought will be considered delinquent. Lenders will usually provide a short grace period to repay the loan, but they will inform credit bureaus of this delinquency if you don’t. This will cause a reduction in your credit score. After all, amounts owed have a considerable percentage of 30% on the credit model.
- Late payments will also damage your credit score, as this will be reflected on your credit list. After all, credit history has a decent percentage on the credit model so be sure you can make payments on time.
- Taking on too much new credit in a short time can be risky as you’re essentially taking a lot of debt on yourself. This will make it a lot harder for you to pay debts, reflecting on your credit score. Avoid taking a car loan if you have too many pending loans. New credit has a percentage of 10% on the credit model.
Now that you understand how a car loan can help you build credit, it is time to look at our car loan terms. You will see how our car financing terms are at the best possible terms so that you can easily repay it while simultaneously building credit.
What makes our car loans ideal?
We, here at Mwananchi Credit Ltd. Kenya provide you with the best car loan terms that you can get. Our car financing terms are the ideal solution for anyone looking to own a car but do not have enough funds to do so. We are reputable lenders that can give you deals at the best possible rates with flexible repayment schedules. Additionally, we can assure you that the process will be done with as minimal hassle as possible.
How long should I wait before my car loan is approved?
Generally, finding an ideal car loan can be quite distressing as it is often unclear which option is best. After all, there are many lenders that each have their own lending sums and interest rates. At Mwananchi Credit, we eliminate this trouble by providing you with even better rates and repayment programs. The application process will also be done quickly, ensuring you can get your car just as quickly as its speed is! This includes any pre-approvals and approvals that are required as well as any credit checks. This is because the car you buy will be used as collateral, so we try to ensure that no additional time is wasted. You can find us all over Kenya with offices in Mombasa, Nairobi, Thika, Kisumu, and Eldoret.
What are your car financing rates?
The car loan amount, rates, and repayment periods will depend on some factors, including the car type and your credit history. However, the loan amount that you can get varies from 150,000 KES to up to 25,000,000 KES. You can get repayment periods that are usually 12 months long, but you can also get one up to 24 months or even 48 months. You will repay the loan interest while owning the car you bought. We offer car loans for a lot of types of vehicles that include matatus and lorries. Additionally, the cars can be both new and used. You can use our financing calculator online to determine the rates that you will likely get.
What does this mean for your credit?
As you can see, our car loans are very favorable for borrowers, which means you will be able to repay them fairly easily. In addition, you will be able to build a reasonably positive credit alongside, which ensures you will be able to borrow at better rates in the future. You might even be able to qualify for some great deals with 0% APR financing.
Can I get a loan if I already have a car?
If you already own a car, then you can consider getting a logbook loan. The logbook loans we offer can be up to 90% of the car’s value, and we can provide the money to you within 6 hours. We do not even consider credit scores for logbook loans, so you are eligible even if you have a poor credit score. This can be a great way to build up a credit score if it is negative. Consider checking out our website if you are interested, as this is strictly not a car loan.
There is always confusion about car loans as people are not always sure how they can affect your credit. In this article, we have discussed the various ways that a car loan can affect your credit score positively and negatively. We hope this has cleared up any confusion so you can get to work on building up that credit, whether through car loans or otherwise. Additionally, we have provided you with our car loan terms to see for yourself how great they are compared to other lenders. This will ensure you get ideal car loan rates while simultaneously building up a healthy credit score. We wish you luck and hope you get the ideal car for yourself!