Tips On Getting Yourself A Better Car Loan
Are you shopping for a newer car than what you currently have? If so, you are likely going to finance the car, so you can have monthly payments instead of trying to come up with the total cost at once. Well, when applying for a loan it is important that you avoid getting hit with a loan that has a large interest rate, as this can make it more difficult for you to pay off the loan. To ensure you get a great car loan, you will want to consider the following:
Trade in Your Current Car:
If you have no more to put down, then you may want to consider trading in your current car. Many used car dealerships will accept trade-ins, which they will factor the value of the car that you are trading in based on the market value and the condition of the car. Based on these two factors, they will give you an offer and will allow you to put the price that they offer you for your car as a down payment. This will help the loan see that you are putting in your own equity into the loan, so they are not reliable for the entire cost of the car. Because you can reduce the price of your new car based on the value of your trade-in, you can lower the loan amount that you need, which will allow you to have smaller monthly payments and a lower loan balance.
Buy a Relatively New, Used Car:
Loan lenders want to be sure that if you stop making payments on your loan that they can sell the car and pay off the loan amount themselves to avoid losing money. By shopping for a car with too many miles on the engine, you can receive higher interest rates on your loan. This is because the lender may feel like it is a risk for them to provide you with a loan on a car that may break down on you shortly after your purchase. So, as a way to recoup a majority of their money quickly, they will likely increase interest rates, so they can eliminate losing money if the car does break down and you stop making payments because of it.
Pay a High Down Payment:
If you have a good amount of money saved up, be sure to put this towards a down payment. Having a large down payment can show loan lenders that you are putting your own money on the line and are putting your investment at risk as well. Because of this, they will likely be more lenient with the interest rates and terms they offer you, as they will take notice of that fact that you are putting up your own capital.
Taking advantage of these options can help you receive a lower monthly payment on your loan, but most importantly receive a loan with better terms and a lower interest rate. Along with a lower monthly payment, you will notice the biggest benefit of having your monthly payment go more towards the principle of the loan, instead of you just paying off mostly loan interest.