Auto loans: useful guide for beginners

by Groshan Fabiola I try to cover as many topics as I can

A car purchase includes many steps, starting with exploring different models and making the right choice and ending with a fierce negotiation for obtaining a good price. Like everyone else, you probably focus your attention on getting the best deal and overlook shopping around for the most convenient auto loan. Well, this represents a major mistake. You should not compare walking into a dealership with walking into a department store because the latter demands great responsibility, planning and a more substantial budget. Therefore, you should react accordingly and prepare yourself in advance for the process, which is quite similar to struggling to get a good deal: you have to begin with establishing a budget, understanding your options in terms of auto financing, continue with negotiating for the auto loan and ending with closing the deal. We also have a helpful tip for you in what concerns auto loans: concentrate more on the total cost instead of monthly payments.

Your credit is important

Applying for a car loan does not necessarily mean that you will get it. Your income and your credit represent crucial factors that help lenders decide if you are a good candidate. They need to have the certainty that you are a responsible individual and you will repay the loan on time. Otherwise, they take a great risk if decide to approve your request for the auto loan. Furthermore, having a good credit score will ensure you a lower interest rate meaning that you will obtain a “discount” for the car. Thus, before applying for an auto loan, evaluate your credit reports and make sure they save your face when going to the dealership.

Establish your budget

This step requires assessing your expectations in terms of cars. For instance, if you know that you cannot afford buying the 2018 Audi3, stop dreaming about this model. Of course, you have to choose a vehicle that fulfills your needs and suits your personality and if you feel a special connection with this particular vehicle, consider purchasing a used one. The main idea is that the price of the car should not exceed your financial possibilities. Moreover, you must think about the short-term investment, which resumes to down payment and the long-term investment, which refers to monthly payments. If your down payment if significant, you will pay lower amounts each month. Do not forget about the additional costs of ownership involving title and dealer fees as well as state taxes.

Explore the auto financing options

After you determine the financial investment you are willing to make for the much-desired car, you have to understand your loan options. First, become familiar with the main sources of auto financing, which include credit unions, banks and dealerships. Shopping around for loans consists in discovering and comparing the benefits and drawbacks of each option and this is exactly what you have to do. Avoid getting lost in unnecessary and unimportant details. Your main interest is to make a decision that will not leave you penniless.