Consumer Car Buying Advice Blog

Credit challenged consumers need to ask themselves if they know what credit life insurance is and should they get it as part of a bad credit car loan

What we do

At Auto Credit Express we’ve spent the last 20 years working with consumers who have bad credit and helping these individuals raise their credit scores and reestablish their car credit by filling out our online bad credit car loan application and financing a vehicle with a bad credit auto loan. Along the way, we try to provide our applicants with the information they need in order to make educated decisions about the kind of loan they should choose (such as a tote the note loan versus a bad credit car loan), since the wrong selection could result in a loan they can’t afford which could result in a repossession that could lower their FICO scores even further.

As with anything else, the key to successfully rebuilding your credit means focusing on the basics. In this case, it means understanding both the pros and cons of dealer backend products such as credit life insurance.

What is credit life insurance?

Although this topic is not as much of a hot button as service contracts or GAP insurance, we occasionally field questions about credit life insurance. Credit life insurance is a form of term life insurance. Term insurance refers to an insurance policy that is in force for a fixed period of time and cannot be renewed. It is also a form of life insurance that builds no cash value.

In addition to being a term life policy, credit life insurance is also what is known as a “decreasing” term policy. This means that the policy is designed to cover the amount of the loan. As the loan is paid off, the loan balance decreases and the amount of life insurance also decreases to match the amount owed on the loan contract.

How to purchase credit life insurance

If you decide to buy credit life insurance, you usually have to do it at the same time you take out your bad credit car loan. The monthly premiums are based upon the original loan balance and the cost of the policy is added to the finance contract and the additional amount is added to and becomes part of your monthly car payment. Because it is part of the finance contract and not paid in a lump sum, you are paying interest on the insurance premium as well as on the vehicle loan.

Is credit life insurance worth the cost?

That is a decision that is entirely up to you. Here are some facts:

Pros:

1. Peace of mind – it will pay off your car if you should die before the loan contract is paid off.
2. The payment is added in and becomes part of your car payment, so there’s no individual insurance premium to pay.
3. Your estate won’t be encumbered with the loan balance or loan payments if you die before the car is paid off.

Cons:

1. Generally speaking, credit life insurance is more expensive than taking out a separate term life insurance for the loan amount.
2. In addition to paying the insurance premium, you are also paying interest on the insurance premium.
3. In any case, if you are single and the loan isn’t paid off before you die, your family would have no liability.

As we see it

Whether or not you take credit life insurance is a decision that you will have to make. If you have a family and are worried that they might not be able to make payments on your car if you die, you might want to look at the costs of term life insurance before you sign on the dotted line for credit life insurance as part of a car loan.

At Auto Credit Express we have helped literally thousands of people with bad, blemished, bruised and tarnished credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Our web site, www.autocreditexpress.com, will help you determine how much car you can afford and unlike other sites, our toll free number is listed on every page, in case you have any additional questions.

So why not begin the process right now by filling out our secure online bad credit car loan application to see what we can do for you.

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