Having a car is essential for most people. If you don’t live in an area with an excellent public transportation system, getting to and from work, not to mention handling other obligations, is difficult. Unfortunately, purchasing a car can be quite expensive, especially if you aren’t sure how to find affordable auto financing. Check out these tips and tricks to help you do just that!
Shop Around First
It may be tempting to sign on the dotted line as soon as you think you find a good financing option, especially if you need to get a car quickly. Unfortunately, good doesn’t always mean the best. For this reason, it is important to shop around before you lock into an auto financing contract. In fact, many financial websites offer calculators that cost the different interest rates, fees, and monthly payments for loans provided by financers near you.
Get the Financing Before Purchasing the Car
Research and decide on your budget, but then obtain the financing you want before you purchase the car. This way, you’ll know how much financing you received and how much you’ll need to provide on your own. Try to secure financing from credit unions, which usually have the lowest interest rates, and avoid long-term financing, as you’ll pay much more in interest in the long run.
Know What All the Terms Mean
Before you apply for auto financing, it is important to understand the terms. This way, you won’t be blindsided by something you don’t understand. Use this quick glossary as a starting point:
- Funding –This is the money you receive from financing and may be provided in a check, direct deposit, or certificate you can use at the car dealership. A refinanced loan is often paid to your old lender.
- Interest Rates –The interest rate is the payment you make for the duration of your loan and is a way the lender makes a profit. The percentage you pay
- Loan Terms –The loan term is how long it will take you to repay the loan. The shorter the term, the more you’ll pay per month but the less you’ll pay in interest. Longer terms are good if you can’t afford much per month but can handle paying more overall. Terms can be anywhere from 36 months to up to 84 months.
- Rate Shopping –You are rate shopping if you apply to several lenders to see which one will give you the best interest rate. Keep in mind that this could lead you to be contracted to multiple lenders if you aren’t careful, plus the multiple credit pulls could hurt your score.
- Restrictions –Most lenders have some type of restrictions. Some won’t finance certain types of vehicles while others won’t lend for you to buy from private sellers. Still, others only work with certain dealerships. Ensure any restrictions fit your needs before you apply.
- Soft and Hard Credit Pulls –A soft pull of your credit score doesn’t show on your report and may pre-qualify you for a loan but may not get you the kind of interest rate you’re looking for. A hard pull is a full credit check, which may temporarily lower your score by a few points. However, you could get a better interest rate this way. Regardless of your choice, a hard pull will need to occur before you can finalize a loan.
No matter where you decide to go to find your affordable auto financing, be sure to research each company thoroughly. Look for financiers who are certified, licensed, and have excellent reviews from current and former borrowers. Doing so helps you to ensure you get the most out of your lending needs.