If you don’t know what you’re looking for when you head out to buy a car, there’s a good chance you’ll end up with either a bad car or a bad loan. Decent car loans definitely exist, but you have to know how the game is played in order to get the terms you want. Before signing off on a loan, make sure you educate yourself on the process and what you can expect to be offered.
Sometimes a long repayment sounds like a nice way to casually buy, but this can leave you underwater – indebted more to a lender than what your vehicle is worth. You want to pay down the debt as quickly as possible, so shorter terms with no early-repayment fees are usually the best bet.
Total Amount vs. Monthly Payment
If you focus too much on setting the monthly payment, you lose sight of how much you’ll be paying in total. Keep reminding yourself that the goal is to spend as little as possible; you’ll already be spending a good sum of money to get a new vehicle, so you need to make sure you’re not paying too much extra by way of interest and loan servicing fees.
Interest Rate Variables
Your credit score isn’t the only determining factor when it comes to interest rates on car loans. Lenders have just as much interest in your income, driving history and the type of car you’re buying. If you don’t want to get caught off guard and end up with bad terms, you need to think about all these matters before you apply for a loan.
Good car loans make car buying much easier, while bad loans can turn the process into a nightmare. If you want to avoid the latter scenario, turn yourself into a savvy shopper before you start looking for your next car.