With second-round stimulus checks rolling out to millions of Americans, now could be the perfect time to get that car loan you need, or pay off the one you have. This round of stimulus checks from the U.S. Government isn't as large as the first ones that rolled out in 2020, but there are still many good ways to put that money to use when it comes to your car.
Do You Qualify for a Stimulus Check
Most citizens who are individual tax filers, or married couples filing jointly, are eligible for this second round of stimulus checks. To qualify, you must file tax returns and be making under $75,000 as an individual filer ($150,000 per couple). Most eligible persons are slated to receive funds automatically which should appear via direct deposit. You can also claim these funds on your upcoming taxes if you haven't gotten a stimulus check. If you haven't received payments under the CARES Act and believe you're eligible, visit www.IRS.gov/eip for more information.
Using Your Stimulus Check to Get a Car
If you've been saving for a vehicle but need a last push to make your down payment amount, the extra $600 for a stimulus check could do the trick. In most cases, down payments are required for auto loans, more so when you're struggling with credit issues. In fact, if you have a credit score of around 660 or lower, you're likely to need an auto loan from a subprime lender.
These lenders work with bad credit borrowers and use factors outside of credit score to approve you for a loan and one of those requirements is a down payment. Typically, the down payment requirement for a bad credit car loan is at least $1,000 or 10% of a vehicle's selling price. This means that your down payment amount could vary but if you're planning on purchasing a more affordable vehicle, the current stimulus check could cover all or most of it.
Paying Ahead on Your Auto Loan
If you're already in an auto loan, your stimulus check can be used to bring down your balance, which saves you money in the long run. Since most auto loans are simple interest loans, interest charges accrue daily based on the remaining unpaid balance. Your interest rate determines how much you pay and it's mainly based on credit score. The higher your credit score it the lower an interest rate you may qualify for.
You don't have to make a large lump sum payment to lower the interest charges that accrue on your car loan, though. Any time you can pay down your principal balance you have the chance to keep some of your hard-earned cash.
Here are three ways you can save in interest charges with a stimulus check:
- Put the whole check toward your balance. This saves you not only interest charges, but time as well. If the $600 covers one or more payments for you, you can be done with your loan a month or two early if you make the rest of your payments on time.
- Divide it among your payments. Just paying a little extra with each auto loan payment you make pays off your loan that much quicker. And, it saves you money in interest charges.
- Use the money to make a half payment every two weeks. When you divide your payment into bi-weekly payments each month, you actually end up making 13 full payments a year instead of 12. Your stimulus check may only cover a few months of these payments, but it can be a great way to get the ball rolling and set the precedent for this year's loan payment schedule.
Sink Some Money Into Repairs
Getting into a new car or paying ahead on your loan aren't the only worthy ways to spend your extra cash. You could always use the stimulus money to make repairs on your vehicle or to catch up on some needed maintenance. Keeping your car in good shape is a good way to retain some of its value, which can be beneficial down the road when you need to sell or trade in your vehicle.
All vehicles lose value over time through the process of depreciation. It can't be stopped, but you can lessen its impact on the value by making sure that you keep your loan balance lower than the value of the car. This keeps you in an equity position and ensures that you're not left owing more on the vehicle than it's worth.
Ready to Find a Dealership?
No matter how you choose to spend your second stimulus check, there are always options that can involve your car loan. If you are planning to use the money to help you get into the auto loan you need, but don't know where to start due to bad credit, you've come to the right place.
Drivers Lane has been matching consumers with qualified special finance dealerships for over two decades, and we want to set you on the road to your next loan, too. The process is fast, free, and zero-obligation. Just fill out our auto loan request form to get started!