Financing a car is a big step, especially if you’re buying a new vehicle. You want to make sure you get the best interest rates possible and reasonable monthly payments. In order to do that, you need to know what type of things affect your loan. This way, you can prepare for the loan in advance to make sure you’re getting the best possible deal.
When financing a car, here are five things you should know:
- Know your credit score. This is very important because it affects your interest rates. Buyers with a good credit score pays less for interest than someone with a bad score. Therefore, if you have a low score, you may want to wait until you build up your credit before financing a car.
- Plan to pay at least 20 percent down on the vehicle? The larger your down payment, the lower your interest rates and payments will be because you’re financing less money than you would need if you make a small down payment.
- If you choose a long term contract to get lower monthly payments, you will end up paying more in interest rates than if you make larger payments each month. Therefore, it’s usually best to get the highest monthly payments and shortest term agreement that you can afford.
- You don’t have to use the financial institute the dealer suggests. In fact, you may even get a better interest rate if you talk to lenders first and get pre-approved for the loan before you go shopping for a car.
- You can save money by saying No to extended warranties and other coverage such as fabric or rust protection that you don’t really need. Sometimes, dealers add fees for things you can do without, so it’s very important for you to read the contract before signing.
When you know what affects your loan and determines your interest rates, you can take steps to get the best deal when financing a car.