Are you thinking about buying a new or used car? Whether you’re upgrading to a new vehicle or looking to buy your first-ever car, it’s important to know about car financing.
Most auto loans are between two and eight years. This means you’ll be making payments (with interest) anywhere from 24 to 96 months. That’s a long time to commit to payments.
Additionally, the interest rate and terms of your loan will have a major impact on your finances. So what is the best way to finance a car?
Great question. Keep reading for everything you need to know about taking out an auto loan.
Improve Your Credit Score
If you’re wondering, “What is the best way to finance a car,” the answer is – with good credit. Your credit score will determine how much money you can get approved for. Just as importantly, it will dictate your interest rates.
It’s best to find car financing with low-interest rates because it will save you a lot of money in the long run. For example, if you take out a $35,000 car loan with a 7% interest rate over five years, your total costs will be $41,582.52. If you get approved for the same loan with a 2.5% interest rate, your total costs will only be $37,269.46
Save Up for a Down Payment
We recommend saving to buy a car so that you have a down payment. Putting money down on a car will lower the amount of money you need to borrow.
This will make it easier to get approved for an auto loan. Down payments can also grant you access to lower interest rates.
If you don’t have money saved up for a down payment, you can trade-in your current vehicle to the same effect. However, if your current car is in rough shape, don’t expect to get a lot of money for it.
Know Your Auto Loan Options
Finally, to answer the question, “What is the best way to finance a car?” you have to know your options. For example, do you know how much money you can get approved for?
Getting preapproved is important because it tells you exactly how much money you can borrow for a car. It will also give you some insight into your future car loan payments so you can budget appropriately. Click here to learn more about your loan eligibility.
If you get denied an auto loan, you might be able to take out a personal loan. However, personal loans typically come with higher interest rates. It’s also harder to take out large sums of money with personal loans.
Fortunately, you can learn how to finance a car if you have low or limited credit. You can find car finance agencies who cater to people in your position. Some car dealerships also provide car loans to buyers with poor credit.
What is the Best Way to Finance a Car for You?
Now that you have a little more information on car financing, what route will you go? What is the best way to finance a car based on your current circumstances? Take your time to make a decision you won’t come to regret.
And if you’re looking for more auto tips or financial guidance, we’re here for you. Take a look through some of our other articles before you go to find more helpful information.
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