Buying a car is one of the primary desires of most people. Luckily, it is very easy to buy a new or used car with the help of car finance schemes available from different lenders. You can approach a bank, credit union, or a vehicle dealership to grant you a car loan. The lenders earn an interest on the finance they make available to you for your purchases.
So, they are always on the lookout for new customers. If you show interest, their representatives would come over to you and help you through the process until your finance is completed and you have bought the car of your choice.
Be careful: It’s loan that you need to repay with interest
Taking a car loan to finance your purchase is easy but that does not make you a reckless decision. You will have to pay back the finance with interest in real money. You should try to take as little fiancé as possible and at the lowest possible rate.
This would ensure your monthly installment is within your paying capacity and you are able to pay the installment on time and comfortably. If you fail to pay the installments on time, it will be reported to credit bureaus and it will registered in your credit history and reflect in your credit score.
A poor credit score makes you ineligible to access credit. You may face many other problems if your credit score is low.
Keep your loan as small as possible
While accessing car finance, you should try to keep the loan amount small. You can ensure this by making a bigger down payment and a choosing the car that’s economical. The representatives from the car dealer and the lender will egg you on to go for a higher and pricier model.
But you should not bit the bait. You should go by your need. There’s no point in buying a car that’s $2000-3000 more than a model that serves your purpose. A more expensive car means more finance and that translates to a bigger monthly installment to be paid over the entire term of the loan.
It’s not investment: Your car depreciates fast
Buying a car is not an investment that will grow over time. On the contrary, the depreciation in the value of car is very high. By the time, you have paid back the entire loan amount your car may not be worth even one-quarter of the money you paid to buy it. This makes the case of buying an economical model of the car stronger, especially if you are buying on loan.
While signing the fine prints of the loan application, you should consider some important things.
- You should pay as much down payment as possible so that your loan amount is relatively small.
- You should try to get a shorter term for your loan. On the longer term, you may be paying less as monthly installment, but more overall over the entire term of the loan.
- There are many sites that offer comparisons of interests on auto loans based on different variables. You should check these sites to know where you stand in terms of your credit score and the loan amount being sought.
- Look at all the alternatives available both among the cars and the finances available. This will lead you to a perfect choice for both.
Find the right lender
- After you have decided on the brand and model of the car, down payment, term, and the interest rate that you find comfortable to pay, you should look for the right lender who offers you the best match on all these counts.
- If your credit score is excellent, it’s very easy to finance a car. There would be many lenders – banks, credit unions, and dealerships — ready to offer you credit for buying a car of your choice. But this should not make you buy more car than you can afford.
- You should pick a brand and model that is comfortably within your monthly paying capacity. Auto loan may not be the only credit you have taken. There would be more monthly installments to be paid. While buying a piece of real estate may make your investment grow over the term of the loan.
- Sadly, that’s not the case with auto loans. It’s better to be prudent and realistic than going overboard and buying a car that only makes your installment bigger. By paying back on time, you will be able to keep your credit score in good health.
How to finance a used car?
Buying a used car can be an intelligent decision. After all, you need a car make things easy and comfortable when it comes to transportation to and from the work, dropping the kids to school and picking them up, going to the supermarket to buy home the groceries you would need through the week. A used car in good condition can do all this. Lenders have no difficulty to finance a used car. Here again your credit score is important. If you have an excellent credit score, the lenders are more than happy to offer you the finance.
Final thoughts
Finding a lender to finance a used car or finance a car with no credit is not difficult. If your credit is good, it’s very easy. If your credit score is not good, you should wait and improve your score before you buy a car on loan. If can’t wait, you can approach the dealership and they will find a way. They know lenders who can offer auto fiancé to individuals with poor credit score.