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Best Way To Finance Your Car Purchase
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When purchasing a new or used car, financing options abound. But how do you know what is the best option for you? Or how can you insure you are getting the best interest rate you can get? Below are a few tips to help you navigate the auto financing waters.
Retrieve your credit score from a credit bureau such as Experian or Equifax. Get more than one credit report to ensure you are getting the best score. The credit report may be inconsistent and you can call the company to report any errors, to better your score.
Term of the Loan
The term of the loan is the amount of time you have to pay back the loan. The longer the loan term, the larger the amount you will most likely pay in the long run. A loan term of 10 years will have lower monthly payments than a loan term of 5 years, but in the end, you will pay more money in interest. Make sure to adjust the loan so that suits you and your budget wisely.
Visit your bank and credit unions to shop around for the best car loan. You can also consult with your car insurance company to see if they have any recommendations for where to take out a loan. Be sure to fill out loan applications within a close time frame because scattering the applications out can actually lower your credit score.
Be sure to look at the big picture when applying for the loan. Look at more than the interest rate of the loan. Be cautious of any fees or penalties the loan may have. Some companies charge you for paying off the loan early. Read the fine print on any application and pay extra attention to the loan term.
It is not uncommon for your car loan application to get rejected. So don’t feel too badly if that is the case. If your credit score is low, the company may require a cosigner on the loan. A cosigner is a person of your choice who signs an agreement to become responsible for the loan, if you are for some reason unable to repay it. Co-signers are often used when you have little to zero credit and you don’t have enough income to support your loan. Finding a co-signer can be difficult so be sure to choose someone you trust.
Bring Financing to the Dealership
Now that you have different loan possibilities, bring the paperwork with you to the dealership and see what financing options the dealership may offer. If the dealership can beat the interest rate and offers you already brought to them, you may take their offer. Otherwise, you can stick with what you had already brought to the dealership, without any drawbacks.
If you are bringing your old car to the dealership for a trade in, wait until after you have discussed the price of the vehicle and financing. This will avoid any confusion that may distract from negotiating the total amount of the loan.
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