Things to Know when Getting a Car Loan

Buying a car is something that is both exciting and has the potential to be overwhelming. There are many makes and models with various features and colors to choose from. One of the most confusing parts of buying a new car is financing the purchase, typically done through a car loan from a bank or credit union. Understanding how the process goes from the moment you step into the dealership until you secure financing with a car loan and finally when you walk out with the keys to your new vehicle makes the overall experience more enjoyable and quicker

Know your Credit Score
Look up your credit score before applying for a car loan anywhere so you don’t waste your time trying to qualify for a loan that you don’t meet the basic requirements of. A higher credit score improves your chances of being approved for the loan, gives you a better interest rate, and qualifies you for a larger sum of money to give you more options when browsing the lot.

Know your Budget
The car payment itself isn’t the only thing you need to factor into your budget. Other expenses including gas and automobile insurance should be factored in to determine how affordable the vehicle is to own in a larger context. It might be smarter to choose something that isn’t as pricey if you expect to deal with high ownership costs. Car Loan

Make a Large Down Payment
It might be appealing to walk into a dealership and walk out after putting little to no money down. It’s great on the surface, but you’re facing higher interest rates and longer loan terms. These combined contribute to thousands of dollars during the life of the loan in interest charges, which could be controlled by obtaining a car loan with favorable terms for you as the buyer. Putting a larger down payment is ideal to have lower monthly payments while extending the term of the loan to 60 or 72 months also does this.

The difference is that you’ll eventually pay more in interest charges by spreading the loan out for such a long period. Aim for a loan term of three years, but up to five if necessary. It’s best to put down 20 percent of the total amount of the car loan to ensure you get the most favorable interest rate for the duration of the loan.

Read the Fine Print
Read the fine print in any contract you sign to ensure you aren’t signing something that you definitely don’t agree with. If you intend to pay off the vehicle before the end of the loan, then you’ll want to ensure you aren’t subjected to prepayment penalties in an attempt to save money overall.

Take the steps to get a car loan so you can have the vehicle you’ve been waiting for. Take your time evaluating your options to get the best deal and feel comfortable with the terms and results of your recently approved car loan.