8 Things To Consider Before Applying For A Car Loan
By: Raymond James
It’s no secret that it costs a lot of money to own a car, but even if you have the money to buy one outright, many people choose to get Auto Car Loans. This is often because they are planning for the future and want to have equity in their vehicle so they can finance another vehicle when this one runs out. However, before applying for auto loans, there are several things you should know.
Things To Consider Before Applying For A Car Loan
1. How much will the loan cost?
When looking to buy a vehicle with an auto loan, it’s important to find out how much the interest rate on that particular loan is. If it’s 9 percent, it doesn’t matter how much the vehicle is because you’ll be paying that much in interest. Often, people who get an auto loan wind up paying thousands of dollars more than they would have if they had just paid for the car with cash.
2. How long are you planning on keeping the car?
While it may be tempting to get a longer loan so you can enjoy your new ride, it’s important to consider how long you want the car and how much the monthly payment would be if you had to pay off the loan early. If you don’t think that you will need this vehicle for more than three years, then getting a shorter loan is probably going to save you money.
3. Can you make the payments?
While it’s easy to get excited about getting a new car, don’t forget that the monthly payment is going to be waiting for you when you get back from your vacation. If you can afford half of it but not all, don’t take out the loan because once you fall behind, it can be very difficult to catch up.
4. Is the vehicle more than you can afford?
While some people want a luxury vehicle and really believe that they can make all of those payments every month, the reality is that if you don’t have steady income and you’re not making enough money to cover your monthly expenses, buying a luxury vehicle is probably not a good decision. Your best bet is to buy something that won’t break the bank if you have any unexpected expenses or if your car breaks down and you need to pay for repairs.
5. Are you financing other things?
It’s important to know exactly what you are planning on spending money on before applying for a loan. Many people make the mistake of thinking that they will be able to afford their car payment, but then find out that they are not able to pay for other things – like rent or utilities – because of this monthly expenditure.
6. What kind of interest rate are you looking at?
Don’t forget that it’s not just the loan payment that you have to worry about. It’s also important to find out what kind of interest rate you are looking at because, once again, this will affect your monthly payments and the total cost of the vehicle.
7. Are you prepared for a down payment?
A lot of dealerships offer somewhat low-interest loans with no money down, but a strategy for this is to have no interest in buying the car. You need to consider whether or not you are prepared for a larger down payment because it makes sense financially when you think about how much interest you can be paying on a higher amount.
8. What’s your credit score?
Finally, it’s important to consider your credit score when it comes time to apply for a car loan. If you have excellent credit, then you will probably be able to get the best rates of anyone. However, if your score is lower or you have missed payments in the past, this may mean that you are going to have more trouble finding an affordable payment plan
About the Author:
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.