Car loans are one of the most common types of financing agreements that people enter into when buying a car. Before you get a car loan though, there are a number of things that you should know. If you don’t know exactly what to expect when getting a car loan, here are six things you need to know:
Your credit score can impact your interest rate
Your credit score has a significant impact on your future interest rate. If you have an excellent credit score, you will typically get the best possible interest rates, which is great for those who want to pay off their loan quickly and save money in the long run. On the other hand, if your credit score isn’t so great, then you can expect to pay high-interest rates that will make the loan harder to pay off in a timely manner.
Take your time
If you are in the market for a car loan, you should know that it is perfectly fine to shop around when comparing different interest rates. Of course, you want to make sure that you don’t apply for more than one loan at a time, but if you have time on your hands and would like to check out multiple options, then it’s perfectly fine to do so.
Compare rates from multiple lenders
You should always shop around for the best rate, and this means not accepting the first rate you see! Use a comparison website to check out all of the loans you’re eligible for, and if you’re looking for a great deal in your city make sure to include this in your search (ie: search for ‘car loan Melbourne’ to find out if there are any Melbourne-specific car loan deals). In addition to comparing different interest rates from various lenders, you should also take the time to compare other fees that might impact your overall costs. For example, some lenders charge origination fees while others don’t. If you are comparing a lender with a 1% origination fee and one without, you should obviously go with the lender without a 1% origination fee.
Don’t stretch yourself financially thin
When applying for a car loan, it’s important to remember that your monthly payment won’t be the only cost that comes with owning a car. There is also insurance to pay as well as things like road tax and servicing costs. You should take all of these factors into consideration when applying for a car loan, and if your monthly payment is too high then you should consider finding a cheaper car or paying a smaller deposit to lower your interest rate.
If you have cash, get a better deal
If you have savings that can be used as a deposit, you should always opt for a loan with as low an interest rate as possible. This is because any money that you can put towards the car purchase will reduce your overall interest costs and thus decrease the amount of time it takes to pay off your loan. Remember, car loans are long-term commitments so you want to make sure that you’re getting the best deal possible.