While it can be useful to save your money and pay cash for most purchases, most of us will need a loan for major purchases. Buying a car certainly qualifies. Cars continue to get more expensive over time and few of us can save enough to pay cash for a quality vehicle.
Chances are you will have to apply for an auto loan. Here are some things to consider during that process as well as the car loans process.
Know Your Budget
It is a must for you to know exactly how much you can afford. You will have costs associated with a new car that go beyond just the monthly loan payment. There are taxes and fees to consider, as well as getting your vehicle registered. Your insurance costs may go up. Know what kind of maintenance is to be expected.
You may not be able to get a precise figure for all this. Still, you should have a good idea. There are plenty of online resources to help. It is imperative to be honest with yourself.
Know how much you can afford to pay as a down payment. The higher that down payment, the less you will have to finance, potentially saving you hundreds or thousands of dollars. Once you have a good idea about the kind of car you want and its price, then you can use an online calculator to estimate your monthly payments.
Consider the total cost of the loan instead of just the monthly payment. A longer term for the loan will cost you more in the long run. Most of the time an auto loan will be anywhere from 36 to 60 months, although it can fall outside that range. Choose the shortest term that you can comfortably afford.
Understand Your Credit
It is simpler than ever to know your credit score. The three main credit bureaus are required by law to provide you with a yearly copy of your credit report. Another option is to join a credit monitoring service like Credit Karma. Try to clear up any negative marks before you apply for a loan.
The higher your credit score the better terms you can get on your loan. If you have negative marks that you dispute you can attempt to get those removed from your report.
You are not done just yet with your research. There are a number of ways you can get a loan. Most commonly people use traditional banks. If you already have established a business relationship with a bank, this might well be your best option. Don’t assume that it is.
You might do better with a credit union. Online banks are much more numerous than ever before. That creates competition that is good for the consumer. Just make sure it is a trustworthy source.
Once you have found the best choice for your loan, it is time to get preapproved. This is a step that helps you know how much loan you can expect to qualify for, although it is not a guarantee. Once you have gone through this process, it is time to head to the dealership.
That is where all your planning and work will pay off.