Consumers can spend days shopping around for just the right vehicle to buy but don’t always spend the same energy looking at car loan options. Searching for the right car loan is just as important as getting your dream vehicle and doing your research may end up saving you money over the term of the loan. Be realistic when looking for a car or truck loan, you’ll want to balance the total cost with what you can afford as a monthly payment. A car loan is secured against the vehicle, serving as collateral for the loan, so much like other secured loans, the lender keeps ownership of the asset until the final payment is made.
If you have bad credit, your car loan may not have as low an interest rate as others. As well it is important to note that loans for people with less than stellar credit is usually over a shorter term. Still, you should shop around through banks, credit unions or even try and get a pre-approval though an online lender.
There are a few key concepts that are important to understand if you’re considering a car loan. By having this knowledge before going to buy a car will give you the leverage to negotiate the best deal.
What to know before you apply for a car loan
Repayment term: There is a little flexibility when choosing your repayment term. If you want more monthly cash flow, choose a longer loan term, just be aware you’ll pay more interest over the life of your loan.
Easy to Pay Interest: There are two types of interest rates, fixed and variable interest rate. You are also free to choose the interest rate based on your particular needs. The lower the interest rate on the loan, the less you’ll pay for the car in the long run.
Down Payment: Money put down on the vehicle, either with cash or trade in, will help reduce your total owing, therefore reducing the time spent paying off your new vehicle.
Easy Payment: Lenders often let you choose the payment frequency of your car loan, for example, weekly, bi-weekly, semi-monthly or monthly payments. Choose a payment frequency that matches your pay schedule and set up automatic deductions for stress free payment.