Apply For An Auto Loan? How Much Money Is Too Much With Regards to Financing and Spending?
An auto loan is a great idea, especially when you do not have enough money upfront to pay for it. The question remains: how much is too much? You will find these answers and more below. Some of the suggestion for cars and car loans may be a few years old, but they still apply today.
Financing and Spending: What You Should Keep In Mind When You Make An Appointment
1) You need to have a handle on your credit score. Did you know that you can still get approved for a loan with bad credit, unlike a mortgage? That does not mean you should disregard your score altogether. You need to know what your numbers are before you try to cut a deal. The one downside is that you are going to pay more for your cars.
It is very easy for the bank or company to repossess your car when you fail to make payments. You miss one payment and the company will send someone over to collect.
Do you have shaky credit?
The truth: you will be so excited to get any deal that you will not remember to ask for something lower. Dealers know that, and they will make a lot of money from you.
That is why you should spend more time shopping around, especially when your score is below 700. You would be amazed at how many people jump on the first offer they get. Several weeks later they come to regret their choice, but by then it is too late.
The dealer is going to be the go-between for most lenders. The higher your score is, the more options available to you, including better rates. Those who do not have the greatest score should do some window shopping before signing on the dotted line.
You should try a credit union or one of the lower-tiered banks. Get a quote from them first. Dealers do not always offer the best rate for someone who has a lower score. They will often time offer something that only benefits them.
The bottom line: you want a short term with a higher payment. You are going to pay more every month, but you will not be paying as long. Hint: the longer you take to pay on your auto loan, the higher your interest is going to be. The interest is where they make their money, not the principal amount.
You should try to pay 20% down to secure the loan. That means there is less to pay in the long run. That also makes you more credible.
FYI: The fees, taxes, and other assorted extras should be paid-in-full with cash. Do not ever add those extras into the loan. You will be increasing the loan amount, not the value of the car. There is a big difference.