Most people who buy a car use an auto loan to finance the vehicle. When you take an auto loan, you allow a lender to purchase the vehicle for you and agree to pay them back with interest over a specified period.
If you need an auto loan to finance your vehicle, here are a few tips that can help you save money and settle your loan as soon as possible:
1. Understand your credit report
Before going to the dealership to pick a car, check your credit report and understand how your credit score will affect your ability to get a loan. If you have excellent credit, you can easily get a loan with great financing rates. If you have bad credit, you can still access financing, but it might be more difficult.
With auto loans, you should always shop around but this becomes even more important the lower your credit score is. Comparing auto loons will help you to find the best possible rates. You will more than likely still have to pay more than someone with a high credit score, but you should be able to find a financing option that fits within your means.
2. Know what you can afford
When considering your monthly payments for a car loan you will need to think about your other expenses as well. You might be able to adjust your spending to accommodate the new expense. However, obligations such as your rent or mortgage, utilities and groceries are ones you will always have to meet. That is why they must be factored into your equation. Regardless of your other expenses, it is recommended that your auto financing car payments do not exceed 10 percent of your earnings.
3. Keep the loan term as short as possible
You might be tempted to opt for a longer loan term to lower your monthly payments. But you should aim to settle your auto financing loan as quickly as possible. While a shorter loan term comes with higher monthly payments, it also means more attractive interest rates. That way, you will pay less for the vehicle and fulfill your financial obligation to the lender sooner.
4. Put some money down
If you have an impressive credit score, auto finance providers may offer you a zero-down loan option. As good as this offer may seem, it usually comes with extremely high interest rates. When purchasing a vehicle, you should aim to put at least 20 percent down. Lenders will offer better rates the more you put down because it decreases your likelihood of defaulting on the loan.
Additionally, the less you contribute to your down payment, the more you will have to take from the lender. The more you borrow the more you will have to repay, with interest.
5. Use cash to cover miscellaneous expenses
You should not include miscellaneous expenses in your car loan. Cost such as sales tax, registration fees, documentation fees, and any add-ons should be covered using cash instead. Again, this will cause you to owe the lender less which will help ensure you are not upside down on your loan.
Do you need auto financing?
If you are in Vancouver, Burnaby or Surrey and need financing to purchase a vehicle, Instant Auto Loans is here to help. You will find that we offer rates that are among the best in the industry. We also provide our clients with courteous, confidential and convenient services. So, contact us to discuss your options or apply now and have your auto loan approved in as little as 15 minutes.