Unless you live in a well-developed area where public transportation is plentiful and reliable, having a car accessible whenever you or your family needs it is pretty vital. Cars get us to and from our chores, social activities, and jobs, and unless you can easily walk everywhere do tackle all these things, a reliable car is your best choice.

All that considered a car is one of the most expensive things you can buy, thus sorting out financing is usually an integral step towards purchasing a car. Here are a few things you should consider if you are planning to obtain finance for a car.


Get Your Score right before you to the dealership

The best thing you could do before getting a car loan is to check your credit score. As with most requirements in the financial world, the steadier your credit score, the bigger chances you will get to finance a car.

Here is how it works: Unlike a credit card or mortgage, you can usually obtain a car loan even though you have a pretty bad credit score, but you will have to pay a lot more. Why so? Because it is relatively easier for banks to enter in your car’s possession if you do not pay.

But when you are eager to purchase a car and get a loan, you are not going to want to ask if there is a lower rate available. This is one common mistake among car buyers because dealers know this, and they make a lot of money on this minor carelessness. They often promote best interest rates on new cars like 2.9%, 1.9%, sometimes even 0%. But what you do not realize is that these rates are only suitable for car buyers with the best credit score, meaning a score of 770 or better.

Those with a score lower than 700s can still get the finest interest rate, however, they cannot qualify for the best promotions. When dealing with a low credit score, as soon as you have signed for a loan, rates rise quickly. For instance, those with a credit score under 650 may be presented with a rate of 10% or higher. To this extent, the lower your credit score, the more essential it becomes to shop around and make sure you obtain the best rate a bank can provide you. Indeed, you may have to pay a bit more than someone with a steady credit, but you will not have to pay the first-rate someone proposes.

If in doubts with your credit, get financing quotes before you go

If your credit score is high enough, and you know it, you can normally get the best financing rate straight from the auto dealer. Don’t have a solid credit? Consider online lenders. You can easily complete a credit application and are offered with your interest rate and a max amount you can pay on a car. The good news is that you will not need to use this loan if the dealership offers you a better deal, but at least you can sleep peacefully knowing that you have an interest rate to beat.

Getting car finance should not be impossible. There are plenty of credit unions and local banks that usually can provide borrowers with a low credit some of the most viable interest rates on both used and new car loans.  

Your term should be as short as you can afford

Even though shorter loan terms come with a lower interest rate, they do come with a higher monthly payment. As we have previously mentioned, car buyers are usually too eager to sign for a loan and purchase a new car as they overlook the essential. Whenever you enter a dealership saying that you want to finance your car, any salesperson will try to negotiate with you focusing on your monthly payment and not on the full purchase price of the car.

If you are experienced enough, you will realize that a car dealer can reveal lower and lower payments all these by expanding the term of your loan and not by lowering the price of the vehicle. That will make a $470 car payment become a $350 car payment, and yet you are not paying less for the car. In turn, you get to pay much more in interest. It goes that simple. The longer your loan, the more interest you will have to pay. Indeed, it might be tempting to stretch your car loan for more than five years and obtain a more relaxed monthly payment, but this means you will pay a lot more in interest than for the car itself.

Put 20 percent down

This can be the simplest yet efficient ways to avoid paying more money in interest than for the car

Putting your money down may sound like a snap, but plenty of auto dealers do not even ask buyers with a steady credit score to make any down payment at all. Enjoying your new purchased car without putting those 20 percent down can be tempting but risky as well. What happens when you find yourself suddenly needing to sell your newly purchased car? Unfortunately, that will not be possible if your loan is bigger than the actual price of the car. A bigger down payment guarantees you that will not happen.

Pay for taxes, fees, and extras with cash

Make sure you do not finance various expenses involved in your car purchase, such as registration fees, documentation fees, sales tax, or any luxuries you intend to buy like prolonged warranties. It goes without saying that car dealers are more than happy to pop these costs into your funding.

Regardless of the status of your credit score, you can obtain an auto loan financing quote in no time. However, make sure you ask your lender about any existing fees before applying or initiating the loan and avoid lenders who lower your monthly payment only to extend the term of your loan. Focus on a lower interest rate and make down payments over the same or a shorter time.


Author's Bio: 

Cynthia Madison Expert Author