There are at least two instances when gap insurance makes sense as part of no credit auto loans
In the know
Although gap insurance is never required, there are times when choosing it can be a good decision when accepting a problem credit auto loan.
We certainly know this because we’ve been in the bad credit car sales for close to twenty years here at Auto Credit Express.
A web site we constructed even covers the horrible credit auto loans process so applicants can avoid a tote the note dealer while studying the issues that can lead to repossession.
In particular, one thing that needs to be looked at is the benefits and drawbacks of gap insurance.
Why gap insurance?
Until the last payment, your car really belongs to lender. At the same time, if you get into an accident before it’s paid off, full coverage car insurance will pay for the damage, less your deductible.
Also, if you’re involved in an accident where the car is declared a total loss, the insurancepany will pay its retail value (possibly less any deductible) at the time of the accident.
The only problem with this is that if you’re early enough into a loan and you only had a small down payment, your vehicle could be worth thousands of dollars less that the loan payoff. If this is the case, you’ll need to continue making payments until the remaining balance is paid in full.
Admittedly, this is a worst case situation, but it can and it has happened.
This is where gap insurance steps in: If you have it, the insurancepany will pay the difference between the amount your auto insurance pays and the balance of your car loan (less any deductible – although if you weren’t at fault, in many states your car insurancepany will cover that as well).
When you need gap insurance
In some cases, gap insurance can be a waste of money. If you have a short-term loan (36 months or less) you will be in an equity situation, even with a bad credit car loan, in a short time.
Also, if your down payment was 20% or more, chances are very good that you will also be in an equity position for all or most of the loan – especially if the term is 60 months or less.
But in just about every other situation, it usually makes sense to buy gap insurance.
As we see it
In at least two instances, buying gap insurance means you can avoid the possibility of paying thousands of dollars to a lender for a vehicle that’s been damaged beyond repair. You can also avoid defaulting on a loan if this situation might result in your inability to pay the remaining balance of the loan.
At Auto Credit Express we help people with bad credit find a dealer for their best chance at getting an approval for a bad credit car.
So if you’re serious about getting your car credit back on track, you can begin now by filling out our online car loans bad credit application.