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Should you get a car loan?
Would it be a bad idea for me to get a car loan? It would be a lot easier for me financially because I would almost drain my savings account if I bought the car out of pocket, but I’ve heard that it’s bad for your credit score and insurance rates if you buy a car with a loan.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If you’d be draining your savings account to buy a new car, it’s a good idea to get a loan. However, you shouldn’t worry too much about the effect that financing a car will have on your credit. While you might see a small ding on your credit when you first take out the loan, you’ll be able to improve your credit over time if you continue to make regular, on-time payments.
Keep in mind that you don’t have to finance the whole cost of your car! Instead,
make a large downpayment
on the vehicle and then finance the rest. This can lead to lower insurance rates, better loan terms, and a shorter repayment period. That way, you’ll save on insurance costs without completely draining your savings account in the process.While it’s true that financing a car can lead to higher insurance premiums, you can find the best rates available by using the
Jerry
app. Just download the app and answer some quick questions to see your policy options in a comprehensive list, where you’ll see quotes from top companies like Travelers, Progressive, and Allstate. The average Jerry driver saves $879 a year on car insurance!MORE: What is a good credit score for a car loan?
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- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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