Financing a car comes with a lot of responsibilities that you may not realize. Since you don’t own the vehicle you’re buying until you pay it off, the lender you’re working with goes to great lengths to ensure their investment is safe if something happens. This includes requiring you to have full coverage auto insurance.
What Kind of Insurance Coverage Does Your Lender Require?
Your lender and the state you live in are the determining factors in your car insurance requirements. When you finance a vehicle, the insurance coverage details are laid out for you in the loan contract and/or the agreement to provide insurance paperwork. You’re required to sign both of these documents before you can take delivery of your car.
If you don’t follow the requirements and allow your coverage to lapse for any reason, you may find yourself paying even more than normal for full coverage auto insurance.
In these cases, your lender may purchase coverage and force you to pay for it by including the premium in your monthly car loan payment. Not having full coverage insurance can also result in loan default, which means your lender can send someone to repossess your vehicle.
Full Coverage Auto Insurance
Once you know what your lender expects, you can shop for coverage. As we’ve mentioned, full coverage is required when financing a car, but what, exactly, does “full coverage” mean?
Full coverage auto insurance is designed to cover the widest range of things that might happen to your vehicle. Whether it's a natural disaster, theft, or a collision, the protection from full coverage insurance takes care of it.
Typically, full coverage car insurance includes:
- Collision insurance – This type of coverage helps cover accident-related repairs.
- Liability insurance – Liability helps pay for medical bills and property damage resulting from an accident.
- Comprehensive insurance – This covers damage that comes from things other than accidents, such as theft, falling tree limbs, and hail.
- Uninsured/Underinsured motorist coverage – This type of coverage protects you if you’re in an accident with an uninsured driver, or a driver that has too little insurance to cover the damage to your vehicle.
Get the Right Coverage – and the Right Type of Loan
When you have bad credit, it’s not always as simple as getting pre-approved, heading down to a dealership, and picking out a car. Bad credit auto financing not only requires you to get the right kind of car insurance coverage, it requires the right kind of lender.
Lenders that can help bad credit borrowers are called subprime lenders, and they only work through special finance dealers. Not all lenders can help you if your credit is poor, and not all dealerships work with the lenders that can. That’s where Auto Credit Express comes in.
We’ve been helping bad credit borrowers find the special finance dealers they need for over 20 years, and we want to help you, too. To get the process of being connected to a local dealership started, simply fill out our secure auto loan request form right now!
