Looking for a car loan? Driving a new car can be very exciting but don’t let your financial security be jeopardized when getting a car loan to finance your new car. Even if you land a good deal on the sale price of the car, the effort will all go in vain if the loan terms are against your favor, and you can be paying many thousands over wiping out your good sales price deal anyway. Here is what you need to know when getting a car loan:
- Focus on negotiating the monthly payment rather than the purchase price. It is all about the bottom-line figure when you pay for something. With a loan in place things can get murky because you’re dealing with payments with the effects of time. There is future and present values you need to wrap your mind around. Rule of thumb is that you focus on getting the monthly payment down so that you know exactly how much you’re paying and for how long. You can easily add up all the payments and figure out your true price for the car you want to buy.
- Know your Credit Score. This is vital information about your credit worthiness and ultimately determines your interest rate on the car loan. A borrower with a high credit score like above 700 can qualify for a better car loan rate. If you can just save 1% in interest from a $20,000 car loan, you can save hundreds of of dollars in the lifespan of the car loan. Plus, when you know your credit score, the car dealership won’t be able to tell you anything to his or her advantage. You can go to a bank or credit union before the negotiation as well and apply for an auto loan to get a sense of what ballpark numbers you should get.
- Cash rebate versus low interest loan, which is better? This is a tough question to answer without actually breaking out excel and do some number crunching. So either find a calculator that can help you do this or a trusted friend who can use excel and build out scenarios for you.
- Avoid negative equity. Being upside down on your car or owing more than what the car is worth is no ideal. Why would you ever pay for something that is worth less? To avoid this situation, Make sure that the car loan has favorable terms.
- Pay down your car loan quickly. A car loan can hinder your financial growth substantially. The faster you pay it down the more money you get back in your pocket to invest and sometime in the future, you will be able to buy cars with out loans or own more than a few cars.