When purchasing a car, you’ll need to find the right car, negotiate a fair price, and most importantly, finance the purchase in the most cost-effective way possible. Unless you have a substantial amount of money saved up, you’ll likely need a car loan. When you borrow wisely, you’ll end up spending, perhaps, thousands of dollars less on your vehicle. What’s more, you’ll also have enough money left in-hand after making your loan payments to pay off other bills and put money towards your other financial goals. Here, we tell you how you can get an affordable car loan.
Set a Budget
Before you start shopping around for cars, it’s important that you determine exactly how much you can afford to pay. Salespeople may make it seem like cars that are out of your budget are affordable by offering you a long-term loan. Don’t sign up for something like this because it increases the term of your loan, which means you’ll be paying interest for a very long time.
Review Your Credit Score
Your credit score plays an important role in how much interest you will be charged. This is because an individual with a high credit score poses less of a risk in terms of payment defaults. So, those with high credit scores get offered a more competitive interest rate. In comparison, if your credit score is less-than-favorable, you may not receive the best interest rate from the lender. If you find that your credit score is not too good, consider not applying for a loan immediately. Instead, use the time to improve your credit score.
The best way to get an affordable car loan is by shopping around and comparing the offers you receive from different lenders. Don’t assume that the auto dealership from where you are buying your car is offering you the best rate. It is in your best interest to also check the rates offered by banks, online lenders, and credit unions. In many cases, these lenders actually offer a better deal on your car loan than the dealership. Get pre-approved for a loan from a few banks and credit unions so you can negotiate a better rate with the dealership.