Car Loan Tips
Most of us need cars to mobile. One of the major advantages of having a car is flexibility. If you want to move from one city to others you just need to drive it. A car will give you more convenience than public transport. Sometimes, you should run to reach the bus. If you drive you have a car, you do not need to wait until the bus comes. Having a car is also helpful for urgent appointment. But, we know that the price of a car is not cheap. Car loans can be good solution if you do not have enough cash for buying a car.
When financing a car, you should think that it is not only in terms of the monthly payment, but also in terms of the total cost. Before going to the dealership you should understand your credit score. The best time to check your credit report and credit score is before you go to the dealership. Car loans are not like a credit card or mortgages. Usually, you still can get the loan even if you have quite bad credit. But, you should pay quite more. Why? It can be quite easy for the banks to take back the car if you can’t pay. If you want to understand your credit score, you can use a free tool including Credit Karma. After knowing your credit score, you can estimate if you can be eligible for the best rates of car loan.
Dealerships will promote good interest rates on new cars, such as 2.9% and sometimes up to 1.9%. But, these rates are available only for the customers with the best credit (with the score of 750 or better). The customers who have credit scores under 750 can get good interest rate but they are not qualified for the best promotions. The customers with score under 650 (below average credit scores) may get car loan rates of 10% or more. The buyers with lower credit score should pay more than the buyer with good credit. So, they need to shop around to get the best rate.
Usually, you can get the best financing rates from the dealership if you have excellent credit. You may not have problem with the financing rate when having excellent score. But, if your score is not great, you should do more effort. It is better for you get financing quotes if your credit is not perfect. Before hitting the dealership, you are recommended to take some loan quotes. You can visit local credit union, bank or online auto loan broker to apply a loan before shopping a car. Using online lender, you can fill the credit application. You can see your interest rate and maximum amount that you can spend for the car. You can ignore this loan if the dealer can give you better deal. Commonly, local banks or credit unions offer credit with the most competitive interest rates for borrowers with average score. You can negotiate car loans with the dealership using the pre-arranged finance.
When you are going to a dealer and saying you want to finance your car, a car salesperson will try to negotiate the loan based on the monthly payment. The sales agent will show you lower payments by lengthening the the term of your loan. They only reduce the monthly payment, not reducing the price of the car. Suddenly a $390 car payment can become a $330 car payment. In fact, you are not paying less for the car. You may get a more comfortable monthly payment, for auto loan over 5 or 6 years. But, you will pay much more for the interest. It is better for you to negotiate based on the total purchase price of the car. The longer time you take to repay your loan,you will pay more interest. But that is not fix rule. In some cases, banks charge high interest rates for longer loan.
You will be better to put around 20% of down payment. You will get a short loan term. To make a down payment, most dealerships don’t require customer with good credit. If you suddenly want to sell your new car, you cannot be allowed if you have more car loans. Bigger down payment can allow you to sell your new car.