Nowadays, an increasing number of US residents have been struggling to pay their monthly installments on car loans. While the numbers are low, they are increasing at a fast pace. However, the loan applicants have been experiencing a lot of problems as far as making monthly payments is concerned. This is happening more since the Great Recession.
As a car buyer, you may want to make sure that you can afford the loan. The car should be something that you can easily afford, and it should also meet your budget. This will keep you out of trouble in most cases. If you want to get the best deal, we suggest that you follow the 5 tips given below.
1. Check your credit reports
First of all, you should get your credit report from the three agencies: TransUnion, Equifax and Experian. Actually, you should check the three of them since you have no idea which one your desired lender is going to use. Moreover, this will also give you enough time to correct your mistakes.
Aside from this, you should check your credit rating because your credit rating will be used to set the rate of interest. If you have good credit rating, you will be able to get a loan at a considerably lower rate of interest and vice versa.
2. Shop around
We suggest that you shop around when looking for the best deal. In the same way, you should look for the best deal as far as applying for a loan is concerned. The majority of people don’t do it. Most of them don’t do their homework before going to a dealer.
According to the Center for Responsible Lending, 80% car buyers make their financing decision at the dealership. Probably it is the convenience or the attraction of the ads offering low rates of interest. Keep in mind that you can get the lowest rate of interest only if you have very good credit scores.
If you want to get started, we suggest that you get in touch with community banks and credit unions. Usually, they offer the lowest rates of interest on car loans.
3. The shortest loan
Since the prices of cars have gone up, the car loans are being granted on higher interest rates so that the total amount of the car could be paid in lowest monthly installments. So, nowadays, you can finance your car for up to 9 years. The monthly payments will come down with an increase in the number of installments.
Here is the catch: if you choose a higher rate of interest and you decide to make payments for, say, 5 years, you will be paying more for the car in the long run than if you had chosen a shorter payment period. So, you should choose a shorter period for payments as this will help you get out of the loan faster.
4. The monthly payment
Some people assume that they are good to go as long as they afford to make the monthly payments, but this is not a good assumption. As a matter of fact, this is a terrible mistake.
So, before you apply for a car loan, make sure you keep these 4 factors in mind.