One of the most thrilling moments in a man’s life is getting the keys to his new car. Now comes one of man’s great challenges – working out how to pay for the car. If you haven’t saved up the cash you need a car loan.
Here are some of the steps involved in obtaining a great auto loan:
Check Your Credit
Check your credit before applying for an auto loan. Every US consumer is entitled to a free credit report, so this is a good time to use it. You will see if there is anything you need to fix before you apply for a loan that may be expensive because of something in the credit report. An error may affect your loan interest rate.
Build a Budget
Build your budget any way that you can. Track expenses back over a few months to get a clear picture of where your money goes and then use this budget to see how much you can afford on car loan repayments.
Decide on a Loan
Now you know how much you can afford to pay every month you can determine how much you can take on a loan. You can play with the figures. Putting down a higher deposit means a lower loan, means lower interest and vice versa. A low down payment may be easy to manage today, but it means higher monthly payments and therefore higher interest rates. Don’t take a loan of more than 60 months.
Shopping for a Loan
Don’t take the first loan offered to you. That will come from the dealer and it will probably be expensive. Shop around. Check credit unions, banks and online lenders.
Prepayment Penalties
Try and remain flexible and try and keep your auto loan flexible as well. Look for a lender that will allow you to make extra payments or pay off the loan entirely without any penalties.
Insurance
This comes in 2 packages. The lender may ask you about insurance. They will be talking about disability insurance and life insurance. The lender’s major concern is that you repay the loan with the interest, so he wants to know that he is covered if something should happen to you.
The other insurance is that relating to the car, the compulsory and the comprehensive insurances. Don’t forget to add the costs of these into your car budget.