About the Author
Ray is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals
Tips for financing
If you are considering getting a car, you will have to first think about the various ways to finance your goal of having one. Depending on your financial status, you might either buy a used or a new car. The following are some helpful tips for financing your vehicle.
Check Your Credit Score before Visiting a Dealership
Car financing is different from getting a mortgage. It is possible to attain a car loan even if your credit score isn’t the best. However, bad debt will make it challenging for you as you will most probably be given a loan at a higher interest rate. If you have a higher credit score, be sure to look for low interest rates, and see what the financier has to offer.
Look for Early Payout Terms
Paying for your car within a shorter time than contracted means you may need to pay a considerably large amount every month. However, making extra payments has the advantage that you will end up saving some money as you get charged less interest payments over the life of the loan. That is because interest is typically charged on a monthly basis, so by paying out your loan early you’ll avoid some of the interest. Don’t be tempted to stretch your payments for an extended period, as this means paying more due to high accrued interest payments. Make sure there are no early pay-out fees attached, and look for admin fees on making extra repayments to ensure you’re making the best possible plan for paying out your loan.
Get Various Financing Quotes
It is crucial to make sure that you visit various dealerships or get several quotes for financing costs. This will help you compare the various loan amounts they are ready to offer you and at what terms. Be sure to also compare interest rates and other fees and charges for each. As a result, you will be sure that you are signing the best available contract for you. Be aware though, too many enquiries on your credit file can impact your credit score, even if you don’t take out the loan – call around or do some research online, but be cautious about making too many applications in a short period of time.
Pay Cash for the Additional Fee
Extra fees may include documentation fees, dealership fees, and sales tax. Instead of rolling all these fees into the loan, it is recommended that you pay for such payments in cash if the financier allows. Your dealership of choice may be willing to include all these fees in your loan amount, but it will result in higher debt.
Have A Good Amount for Initial Payment
Once you consider getting a car, it is important to save for your down payment. Make sure you have as much as you can, as this will help reduce your loan amount and interest paid. Not all lenders require a deposit though, so if it’s not something you can manage, you can still access car finance. If possible, it is a great head start to have at least 20% of your car’s total amount. This helps you save some dollars.
Limit Late Payments
Late payment may result in you paying penalties and hefty fees. Although this might happen due to various reasons, it should not be a habit. Paying on time has the benefit of improving your credit score. In addition, it will help you save a few dollars at the end of your payment.
Have a Cosigner
Having a co-signer may help you get a low-interest loan, which could mean that your monthly fee will be low. This approach is usually helpful for people with bad credit or young people who are just starting up. While you might have a secure, well rewarding job, if you have past dishonours or high amounts of other debt, the interest rate may be higher as you seek additional financial contracts. And to make things easier for you, look for a co-signer with a good credit score.
Work on Your Purchase Timing
Typically, car loan interest rates fluctuate as a result of economic situations. Ensure you take your time and research the available interest rates from different dealerships and lenders before signing a loan contract. Make a note of seasons when the rates usually go low for the dealership you would like to borrow from. If companies do not have huge sales, this might be the best time to make a purchase. This is because, in such a season, you are more likely to get a good deal with low-interest rates.
Avoid Sketchy Companies
It would be wise if you try to avoid any firm that seems sketchy to you. Look for things such as financial accreditations, dispute resolution services and listings with relevant regulatory bodies to help you choose a reputable company. This will help you avoid signing unfavorable contracts with outrageous expectations. As a way of avoiding questionable companies, don’t be afraid to ask a lender for their accreditations – responsible lenders will have the answer at the ready.
We hope these tips help you get the deal you’re looking for to finance your next car, whether it’s from a dealership, bank or alternative online lender.