Nowadays, the car has become a need, instead of it being a luxury. First car purchase in life is the second greatest milestone in life as well as the second most expensive purchase in life. Most of people look at a car as a necessity for shopping, driving kids to school, running errands or field trips. A new car always brings self-satisfaction and a sense of accomplishment in your life, but its purchase can be very stressful and tricky. If you cannot save up the full price for a car you should consider your second best option – a car loan. Now I know what you are thinking: “Car loans are designed so that banks will rip you off and consolidate tax on tax on tax so in the end you will pay the car for the price of two!”
These are ghost stories that are told by the people that are either inexperienced or they have a very bad credit report. There are various credit options you can opt for. For example you can buy the car with pure cash, high limit credit card, personal loan etc. But you should opt for a car loan because it is a specialized loan with lower interest rates and a longer term of repayment. However, before diving in these waters, you should know a thing or two about car loans, being that good deals are not that easy to find. Here are a few helpful tips.
Step 1: Credit report check
First things first, run your credit check before even thinking of applying for a loan of any kind. This service is usually free once a year and can be demanded from your creditor. This will give you the image of your credit capability. You will find all incomes and outcomes for the past year in the report and it is of great importance to check it thoroughly for any inaccurate information. The banks will give you your credit score based on it, which primarily decides if your loan will be preapproved. If you notice any mistakes in your report contact your creditor and inform it for a fast repair.
Step 2: Pay your bills
Your credit report generates a credit score, which is a number from 1 to 1000. This number represents your credit capabilities. If you were left with some debts in the past, it will show as negative points and will significantly lower your credit score. It is highly recommended to get all your debts cleared and work to make your accounts have a positive balance at least three to four months before applying for a loan. This will surely show positively on your credit score because banks love unspent money. Usually banks demand a credit score over 600 for approving a car loan.
Step 3: The amount of the money you will loan
Another way of saving up money on your car loan is to have a sizable down-payment. Here is the logic. The less money you borrow, the smaller the interest rate is, as well as the monthly payment. Don’t get your head up in the clouds, these are the moves in your life that require your stability and tactic. Borrow the money you truly need for a car purchase, so that your car loan may be preapproved in short term with the interest rate that is most suited for your budget. This way you will have all the cards open on the table and won’t encounter surprises at the end of the month.
Step 4: Do price comparison
Banks aren’t the only financial institutions you can lend money from. You should check credit unions, community creditors as well as credit card companies and online lenders. I will advise you to put primus on online lenders. In recent times, many people have experienced great deals with them. When applying for a car loan online, you will skip many administrative taxes, as well as procedures which will save you time and money. However the more lenders you check, the more complete picture you will have for the best deal for your car loan. Feel free to ask as many questions you want, since a bit of information never harmed anyone.
Be wary of the car dealers! Every car dealer will offer you a car loan arrangement. You should avoid this at all costs. In order to build up the car price, a dealer will offer you lots of add-ons and car services such are life insurance, disability insurance, tinted windows, aluminum rims, etc. The higher the price of the car is, the higher the interest rate is, as well as a monthly payment. However if you really need this service or add-ons it is better to buy them outside the dealership because the prices are lower and they don’t have an interest rate.
Many inexperienced people get stuck on the car loans with excess money, built up interest rates and high monthly payments, generally poor deals. There is always a gap which can save you money on your quest for obtaining a good car loan. Review these steps and ask around, and for the end . . . just imagine the scent of the new car. . .