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Having a stable income, and a lovely home, you would probably wonder what is next on the list. Most people would answer a decent car to drive you around from place to place. But, many people often talk about the horrors of getting a car because of the multitude of factors to consider, especially when it comes to auto loans. A lack of research could potentially increase your interest rate which means you will end up paying more than you should be, which is why you should check out creditspring small loans. If this is your first time taking out an auto loan we have also compiled a few tips for you in this guide to help allay your worries.
Do proper planning with your budget
Cars are no longer just a form of transport, they sometimes become a status symbol and because of that, some people tend to overreach and purchase cars beyond their means for their reputation. This is where you have to really judge what kind of car is within your earning power instead of looking at prestige. You can easily find an auto loan calculator online to calculate the cost of a car before going down to the car dealership. The recommended is to spend no more than 10% on your desired car.
Just because it is longer does not mean it is better
It seems tempting to take the longer auto car loan with a lower monthly payment but unless you are on a tight monthly budget, we would not recommend taking the longer one. Longer auto loans would mean that more interest rate is paid in lieu of a shorter contract with larger payment sums. So, if you are really intending to get a car, the best option would be to choose the shortest term with an amount that is reasonable for you.
Score well on your credit report
Just like how we had to score well in our exams as students, as adults, we have to score well on our credit scores to assure people that we are financially responsible. When dealers know that you have a good credit score, they tend to offer lower interest rates. This is especially so if you have a good track record of making repayments promptly. So, take some time to check out your credit score before approaching a dealership. If you find that your credit score is not very high, you can build it up first.
Never settle for the first option available
There is always more than one dealership and if you want to get the best deal possible, never settle for the first one you see. In order to know the market rate and do more research, you would have to approach multiple dealerships. So, as tiring as that might sound, doing this can stop you from getting overcharged on your interest rates. The amount of money you save from lowered interest rates can go to better things. A car is a long-term commitment, so you have to make sure you really know what you are getting into.
Preapproval allows you to negotiate
Preapproval is basically the process where dealerships offer you a formal amount for an auto loan before you have even settled on a car. This happens when the car dealers find that your credit score is optimal and when they want your patronage. This is like having a job offer as you are interviewing for other jobs. You have a higher negotiation power to bring interest rates down or request better rebate terms. Thus, if that is something that you are able to do, you should get to it.
Make the choice between new or used
With the different types of cars, there will be different rates pegged to them. For new cars, the interest rate that follows it is lower but that is also because newer cars are accompanied by higher costs. So, adding it up, you might actually save more with a car that has been used with higher interest rates. Used cars tend to cost a lot less which means that the total interest you pay will be a lot less than a new car.
Always check for promotions like manufacturer specials
There are always new car buyers in the market constantly, and since the auto industry is not small by any means, manufacturers have to come up with promotional schemes to distinguish themselves. This is good for the consumers. Always be sure to check out what offers are on at the current moment at the different dealerships. Some even have offers that are geared towards college students and new graduates. Of course, you will still have to supplement proof of income and credit score that you are able to manage an auto loan.
Two is better than one if you need help
It seems like we really need good credit scores in order to secure good deals which might spell trouble for some. But, fret not, not all is lost as you can also tap out and ask someone for help to be a co-signer or co-borrower. They are people who will be signing the contract with you and both person’s credit scores will be factored in when dealers negotiate the interest rate. So, if you have a spouse or parents that are available to help you out, it would be wise to approach them.
Pay more down payment
If you are able to afford a bigger down payment, you should do it because that would mean you will have less to borrow. With a smaller borrowing amount, there is a higher likelihood of you getting a lower interest rate. The recommended amount of down payment that you should aim to pay is about 20% of the cost of the car. So, before you sign the contract for one, you should calculate how much you are able to pay for your desired car and do up the necessary savings for it.
Thus, these are the best nine tips that will help you secure a good auto loan, just remember that research is key!