If you’re like most of us, buying a car also means getting an auto loan. This also means that you need to be careful with your hard-earned money. So here are the important things you need to know before applying for one.
Know Your Score
Your credit score will help determine your interest rate. That’s why you should always examine your credit report before you apply for a loan. Sift through your report in case there are any mistakes that need to be corrected. Ideally, you should check your credit report once every year to ensure that your financial situation is good.
Try and choose a loan term that’s as short as your financial situation allows. This may increase your monthly payment amount, but the interest rate will be lower, and you’ll pay less overall for your car. You’ll also be free of debt sooner.
Always save and pay the largest down payment amount possible. At minimum 20% and at most, how much ever you can afford. Every $1,000 you put down decreases your monthly payment by about $18. So, ideally, you should wait until you can afford a sizeable down payment.
Timing is very important for car purchases. If possible, wait till October, November, or December to shop for a car. Even during those months, try and go towards the end of the month or early in the week because that’s when salespeople are trying to meet their quotas. Price negotiations may be more comfortable during these times.
Taxes and Fees
People often overlook taxes and fees. Try and account for these at the start of the buying process. Also, you should definitely pay these off in cash. There’s absolutely no need to roll them into the loan and pay interest on them. It could save you hundreds of dollars.
If you’ve already got a car loan, don’t despair. You can still save money by refinancing with better terms. If your credit score has improved, you could apply for a lower interest rate and a shorter term. Refinancing is the best way to save money on a loan that you’ve already committed to.