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How BNPL (Buy Now Pay Later) could impact your car buying options in Beamsville

How BNPL (Buy Now Pay Later) could impact your car buying options in Beamsville

The buy now, pay later (BNPL) facility has overtaken the Canadian and global economies.

While these facilities may help consumers break down larger purchases into something more manageable, few Canadians have considered how these facilities will impact their car financing options when it comes time to buy a new car.

It will impact your credit score

While some BNPL programs claim to only perform a soft credit inquiry before approving a loan, most of them will report to TransUnion and Equifax if you take one of their 6-60-month repayment programs.

This inquiry will initially impact your credit score because it is treated as a hard inquiry; you are opening a new tradeline, after all.

But there is another consequence of this new facility; it will impact the amount of cash you have available monthly that can be applied against your new car loan.

Car buying budgeting fundamentals

Even if the BNPL loan comes with a zero percent interest rate, the monthly amount that you have to pay needs to be factored into your budget.

Lenders use a ratio called debt-to-income, and the most lenders will approve is a forty percent debt-to-income ratio.

Suppose you are making $5k a month. In that case, the most debt you can carry is $2,000. This is a combination of your monthly payments now plus whatever new car loan you are applying for.

With the average car payment easily exceeding $500, and rent costs on the rise, you need to keep a close eye on those tempting BNPL offers, so you don’t end up carrying more debt than necessary.

Easy ways to make your car-buying experience a more pleasant one

There are a few things that you can do to help make your car buying experience a more pleasant one.

Start by working on your credit score to try and get it over 680; this is the magic number to qualify for the most competitive interest rates, whether you are applying for a car loan, mortgage, or any other credit facility.

All you need to do to raise your credit score is to reduce the total amount of debt you are carrying.

To do this, try to make extra payments to bring down those debts. While you work on reducing the total amount of debt that you are carrying, the next and arguably easiest step to follow is always to pay your debts on time, when they are due.

These simple suggestions are going to help your boost your credit score and will make financing things much easier in the future.

Where to get the best deal on a new car

Everyone loves a good bargain, and if you are serious about getting the best deal on a new vehicle, regardless of your credit score, then you should visit a car dealership in your area. The dealership will have access to lenders that can provide the most competitive terms in Canada.

This same dealership will also be able to show you what steps you have to take to raise your credit score.

While BNPL can be a useful tool when you are trying to make larger transactions more affordable, you should keep those transactions to a minimum until you have purchased your new vehicle, so contact your local dealership today and start reviewing your loan options.

We will use all our skill and experience to deliver the lowest possible Beamsville auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

Categories: Auto Loan

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