Home Auto Tips on Getting the Best Car Loan

Tips on Getting the Best Car Loan

by pps-DUEditor

Budget: The first thing you should do is understand how much you can afford to spend on a new car. Don’t fall for tricks salespeople try like financing with low monthly payment over a five to seven-year period. You need to consider how much you can offer as a down payment. The more you pay upfront, the better. You’ll borrow less, pay less interest, and get done with the loan quickly. You should ensure that what you pay per month does not stretch your budget. As far as possible, keep the loan term around three to four years. Also, know that the lower your AOR, the lower your interest costs are.

Credit Review: Your credit history determines the terms of your loan. Check your credit report before you apply and get any mistakes corrected. Three credit agencies give you one free credit report per year.

Explore Your Options: Consult with several lenders before you go to the car dealership. Apply for loan pre-approval with multiple lenders in the same two-week period to minimize the impact on your credit score. Check with banks, credit unions, online lenders, and once you have pre-approval, see if the dealership can offer you a better deal.

Beware of Sales Tactics: Salespeople will offer you options that seem cheaper but are not. Do not negotiate on lowering monthly payments. Only negotiate on the final price of the car. Affordable monthly payments are important, but you could end up with a long term loan where you end up paying a lot more. Don’t make a smaller down payment to make monthly payments more manageable. Only buy what you can actually afford. Don’t be enticed by fancy features. Stick to your budget.

Prepayment Penalty: Ensure that your loan does not charge prepayment penalties. If you’re in a position where you can pay off your loan faster, then you should be able to do that without being penalized for it. Read the fine print before signing.

Insurance: Car insurance is mandatory. You should never drive an uninsured vehicle. But you can skip unnecessary insurance. Purchase your own insurance so you can pay less for it. If you roll the insurance cost into your loan, you’ll pay more interest.

 

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