If you are a person who has a little research on cars, you will know that the loan interest rate of second-hand cars is generally higher than that of new cars. If you buy second-hand cars in the recession, the interest rate will be higher. This is related to the market. If the economic recession leads to the decrease of cash in the market, it will make it more difficult to apply for loans. Although there are still lenders issuing loans, there are always some types of loans. Even if the borrower is willing to borrow at a very high interest rate, it is difficult to obtain them. For example, the subject of this article is second-hand car loans. If you are a person who is enthusiastic about cars, or have the idea of buying second-hand cars, you can carefully read the main points of this article, which will deepen your understanding of the economy, and can also bring some help to your future car loan! Even if you have no idea about cars, reading more economic articles will always have potential benefits for you!
The price of trade-in has dropped
In a loan transaction, the value of the down payment is an important factor to measure whether cooperation can be achieved at a high interest rate. Many people buy cars and want to use their idle cars as most of the down payment, and even some people think it can cover all the down payment. In theory, this idea is feasible, but only when the economy is good. When the economy is booming, your old car may sell for $8000, but if you choose to sell your car during the recession, it is likely that you will only get $5000. In the period of economic recession, the price of goods tends to fall, so you must accept this gap. It is because of the depreciation of your second-hand car that your down payment may be reduced, making your loan amount higher.
Be alert, this is not a good thing. If your down payment is reduced, your loan will be more, and your interest rate is likely to become higher. Some people will be curious? Why would interest rates also rise? This is because the lender will also measure whether you have the loan conditions. When you cannot provide a sufficiently high down payment, they will think that your financial situation is not stable enough, so they will raise the loan interest rate to avoid losses. This practice is reasonable and normal for banks, so even if you are a person applying for loans, you should not scold them. After all, the status of both parties in the transaction is equal, and no one needs to compromise at the expense of his own interests. In order to avoid this loss, you can try your best to keep your car in good performance and appearance, maximize its value, and exchange for a higher down payment!
Slow development of automobile market
When the Great Recession comes, people are more concerned about their food and clothing than about cars and housing, so the car market will suffer certain losses. If you must apply for a car loan, you can try to use the car you bought as a guarantee, which is also a way to reduce the loan interest rate. But the disadvantage is that the lender will retain the ownership of the car, and you may feel uncomfortable. If you default on the loan, the lender has the right to sell the car without your consent.
When the car market develops slowly, the lender bears a higher risk to some extent, because even if the ownership is in their hands, they cannot guarantee that your car can be auctioned at a good price. Even if you think your car is very valuable and has inestimable value, in the ruthless market, your precious car may be nothing to others. This is a cruel reality, and you need to face it.
Less high risk loans
If your credit is low, you can apply for this high-risk loan, but you'd better choose a low-risk loan. The economic recession will cause banks to be unwilling to lend to people with unstable finances and low credit rating, so you have to choose high-risk loans. In addition, the risk of second-hand car loans is relatively high. Generally, only some lenders who are specialized in this field are willing to lend to you. Because of the high risk, the interest rate of loans will also be high.
