Car Loan Advice: Reminders to Avoid Financial Disaster

car loanFirst time car buyers have a particular make or model in mind. It’s something you’ve set your sights on ever since you started dreaming about getting your own car. Whether you end up buying that particular model or something else depends on many factors, including the price.

When buying any vehicle, be sure that it is something you can afford. This will keep you from financial troubles. Once you have decided on your budget, it’s time to apply for a loan. Here are some things to help you get the best deal:

Check your credit score

Checking your credit score is important as interest rates depend on it. Look for sites that give you an idea of your credit score; it is not the same score that the lenders use, but at least you’ll have an idea about your credit standing. You may also ask your credit card company for your score.

Shop around

Never go to any dealership without doing your homework. It’s best to shop around for the best rate beforehand. You may start with your local banks and credit unions.

Most car buyers, however, decide to finance at the dealership. While most dealers offer low rates only to buyers with excellent credit ratings, you can still find car dealerships with bad credit financing programs out there. You just have to know where to look.

Choose the shortest and the most affordable

The higher the cost of the car, the longer the loan terms. While a longer term offers reduced monthly payments, it will raise your total cost significantly. You pay more in the long run because extended terms often come with high interest rates. A 48-month loan could mean higher monthly payments, but at least you’ll be debt-free much sooner.

Go over your budget before applying for a loan. Save more money so you can offer a larger down payment, which will cut down the amount you need to borrow. With this settled, you can be one step closer to buying your preferred car.