Getting a car loan does not have to be a daunting task. However, you need to do your homework to ensure you get the best deal. That being said, here are some great car financing tips:
Borrow as Little as You Can
With a conventional car loan, you are basically borrowing the entire amount for a vehicle and making monthly repayments, in addition to interest. So, if you already have some money saved up and can afford to borrow less, you will benefit from a lower interest rate and monthly repayments.
If you are looking to buy a new car, it’s advisable to have at least 10% of its value saved up before applying for the loan.
Pick a Shorter Loan Term if Possible
Car loans work in a similar manner to other types of car finance, in that most of the interest is considered when you pick a longer term. Yes, the monthly payments may work out cheaper if you decide to repay the loan for over a period of 60 months, for instance. However, the overall amount of interest you owe will be larger.
When comparing loan options, ensure you cross-reference every deal and settle for the one with the lowest interest rate.
Compare Car Loans
In order to get the best deal for a car loan, it goes without saying that you need to make comparisons – a car finance broker can help with this. There are numerous sites that make this easier with multiple loan offers in one place. With a few financial and personal details, you’ll be able to come across a deal with the lowest monthly repayments and interest rates.
Even so, it is important to take your time and read through the full details of the loan. This will help you find important information regarding the loan’s flexibility, particularly when it comes to the annual adjustable rate, which could be representative or fixed. Representative means that the rate is subject to change, which could have you paying more.
Check Your Eligibility
There are numerous free services on the internet that allow you to check if you are eligible for a car loan before applying. This is known as a soft check, as it does not affect your credit score if you do not qualify for a certain loan.
Consider a Cheaper Car
This one is a no brainer. The cheaper the vehicle, the less you will have to borrow in order to afford it. You will not be the first to be interested in a vehicle with features that are way beyond your budget. However, taking a step back and considering your finances will help ensure you can afford to repay what you borrowed. This ensures you don’t find yourself behind on payments, which often results in hefty fines from the lender.