Saving Your Tax Refund for an Auto Loan

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - July 13, 2020

With tax day jumping from April 15 to July 15 this year due to the coronavirus pandemic, have you thought about all the ways you could use the money you get back? You should! There are a lot of perks to filing taxes in July this year, including getting a tax refund check just ahead of some new 2021 model vehicles.

Bad Credit and COVID-19

If your credit took a hit in the first half of this year, you're not alone. With many people temporarily and permanently out of work due to the COVID-19 pandemic, millions of Americans may be facing a lower credit score in the second half of 2020.

Lower credit scores mean more people searching for bad credit car loans through subprime lenders. This means there's more competition for lenders to choose from, so doing everything you can to have your ducks in a row may help you stand out from the crowd. Using your tax refund to help pay for your auto loan is a good way to start!

3 Uses for Your Tax Refund on a Car Loan

In many cases, a tax refund can really help you save money on a car loan no matter which stage of the process you're in – the start of a new loan, the middle of your loan, or almost paid off.

If you're expecting a tax refund after the July 15 filing deadline, here are the three ways you could use your 2020 tax refund for an auto loan:

  1. To kick-start a new loan – Bad credit car loans typically require a down payment, often of at least $1,000 or 10% of a vehicle's selling price, sometimes whichever is less. If you're expecting a hefty refund, why not use it to start your auto loan off right? Down payments can be made in cash, trade-in equity, or a combination of both, and the more money you put down now, the more you can save in interest charges later.
  2. To save on interest charges, mid-loan – If you're already in the middle of a car loan, why not make an extra payment or two? Most auto loans are simple interest loans, which means they accrue interest daily based on how much you owe. Making a large payment in the middle of your loan can help significantly reduce that balance to save money in interest charges.
  3. To pay off your car loan early – Maybe you only have a few months left to pay on your loan. If this is the case, why not get a jump on it? Paying off the last of your loan all at once saves you money in interest charges, and depending on your situation, you may get more equity out of a vehicle by paying it off early, too.

Shopping for a Car With Your Tax Refund

If you think that using your upcoming refund is a great way to start off an auto loan, but aren't sure what to look for in a car, we can help.

Here at CarsDirect, you can shop all the latest availability for new and used vehicles, and research what you might be interested in before you start driving from dealership to dealership. Then, when it's time to get that loan you're looking for, you can do that right here, too.

We also work with a nationwide network of special finance dealers that are teamed up with lenders ready to help people in unique credit situations. There's never a cost or obligation to use our service, and getting started is easy. Just fill out our auto loan request form, and it's our pleasure to get you matched to a dealership in your area!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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