Consumer Car Buying Advice Blog

The pros and cons of choosing credit life insurance when financing a bad credit car

Your options

It doesn’t always but in some cases it does make sense to add credit life insurance to no credit auto loans.

We understand this situation because we’ve been doing bad credit car sales since 1992 here at Auto Credit Express. We also developed a website that helps applicants understand topics such as applying for horrible credit auto loans and repossession as well as today’s topic, choosing credit life insurance when financing a bad credit car.

Credit life insurance

Credit life insurance is a form of decreasing term life insurance.

“Decreasing” means that the payout on the policy is designed to cover the loan balance at any given point during the loan. As the loan is paid off, the amount owed decreases and the amount of insurance covering the loan also decreases to match the loan balance.

The word “term” means that the insurance policy covers a fixed period and cannot be renewed. Also, unlike a whole life policy, term insurance builds no cash value so you can’t borrow on it, either.

When and how to purchase

If you want credit life insurance for your problem credit auto loan you’ll have to choose it when you sign up for the loan. The monthly premium is based on the beginning loan balance and the cost is rolled into the finance contract and added to the car payment.

Pros and cons

Like credit disability insurance, you must decide whether credit life insurance is worth the cost. Here are some facts:

Pros:

1.    Peace of mind – if you should die before the loan is paid off the insurance will pay off the loan and your estate won’t be responsible for the remaining balance
2.    One payment – the insurance premium becomes part of your car payment, so there is no additional bill you need to pay.

Cons:

1.    Cost – typically, credit life insurance is more expensive than a comparable individual decreasing term life policy.
2.    Interest costs – because it’s part of the loan, you’ll pay interest on the policy cost each month.
3.    If you’re single – if there is no co-signer and you’re single, even if you were to die your family cannot be held responsible for the loan balance.

As we see it

Choosing credit life insurance for a bad credit car loan is up to you. If you have a family or a co-signer, and you’re concerned they might not be able to continue making the loan payments, first determine the cost of an individual decreasing term life insurance policy before signing up for credit life insurance that’s tied to an auto loan. Also remember that no lender can require you to purchase this kind of coverage.

We also want you to know that at Auto Credit Express we assist people with bad auto credit in locating a dealer for their best chance at getting approved for a bad credit car.

So if you really want to get your car credit back on track, you can begin now by filling out our online car loans bad credit application.

Tags: Bad Credit, bad credit auto loans, credit life insurance

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