Whether you are buying a used car or a brand new one, there’s more to consider than just the make and model. You will also need to find the right financing to be able to purchase it. If you have saved enough money, you may be able to buy a vehicle outright. If you haven’t put enough aside, though, it may be time to consider an auto loan.
Vehicle financing plans will help you discern what sort of car you can afford. It can also ease the burden by allowing you to stretch the repayment period and make your expenses manageable. The right financing plan should help you buy the car you want, and it should not put a strain on your finances.
Getting an auto loan is a huge responsibility. It involves having a good credit history, a stable income, and enough money to pay a down payment. Owning a car will require you to spend on gasoline, maintenance, and insurance.
Before you get carried away with the excitement of buying a car, here are some basic things you should know about auto loans:
- Know your credit score
Your credit score will influence a lender’s decision to approve your loan and at what interest rate. It gives them a picture of your financial capabilities and if you have the means to make timely repayments on your loan. The higher your credit score, the lower the loan rates you might be offered. If you have a history of unpaid debt such as outstanding credit cards or personal loans, this can bring your score down and affect your eligibility for an auto loan.
- You should get pre-qualified by a lender
Before you start shopping for different types of cars, you should try pre-qualifying for a loan. Pre-qualification lets you know if you have a high chance of getting approved, and how much a bank or credit union will loan you. This process can help you manage your expectations about what sort of cars are in your price range.
- Decide how much you want to spend
Even with a good credit score and a high borrowing capacity—that is, how much a lender is willing to loan to you—you need to spend your money wisely. Large SUVs and trucks will consume more gas, and their parts may be more expensive to replace. When you apply for pre-qualification, the lending institution will give you estimates on how much each monthly payment will cost—the more expensive the car, the higher your amortization, and the expenses to operate it.
- Shop around for rates
Each lender has a different rate for their loan. You can find the lowest or the most suitable auto loan for your needs by shopping for rates from at least three different lenders. You can get quotes from mortgage brokers, banks, or credit unions. Some of them have partnerships with car dealerships, which can get you significantly lower rates; however, it may limit the brands you can choose from.
- Make sure you have enough savings
You will need to pay a down payment of at least 20 percent to take out most auto loans, so make sure you have more than enough cash in your account before you apply. Whether you decide to get an auto loan now or postpone it for a later time, putting money aside for your car can make a huge difference.
Now that you know the basics, you can apply for your auto loan with confidence. As long as you have kept your credit score high, put aside enough money, and you do enough research about the options available to you, it is possible to buy any car that you want with a good auto loan. Do you need an auto loan in Buffalo, NY? Our credit union helps people like you get access to financing that fits your needs. We can provide you with the tools and resources to empower you to afford the car you want at a rate you can manage. Visit our website and start your application today.