Do you need a new car, but your credit is a little shaky?
While there are many lending options to consider before going car shopping, there are many things you can do to make it easier to get a car loan. Consider these five tips for getting good terms on a loan for your next vehicle.
Plan Your Purchase
After buying a house, a car is one of the most expensive purchases for most people. If you have an older vehicle, you should start saving money for your next car.
To help shorten the loan terms, plan to put at least a 20% down payment on a new vehicle. Larger down payments help you avoid situations in which you owe more than the car is worth as it ages.
Know Your Credit Score
Along with saving for your next car, keep track of your credit score. A good credit score can help you get a better interest rate on a loan for a vehicle.
If your credit score is less than stellar, find ways to raise it. Go over your credit report to look for discrepancies, like a loan that has been paid, but is still showing up in the history.
If you find an error on your credit report, write both the creditor and the credit bureau to report the discrepancy. Tell them what is in dispute, provide the date you paid off the debt, and request a correction on your credit report.
Consider Online Lenders
A good option to consider when your credit isn’t the best is an online lender. After you fill out a loan application, you will find out how much the interest rate will be and how big of a loan you can get.
By getting pre-approved for a loan, you will know how much you can afford to spend on a vehicle. Companies like CheapCarsCanada.com may be able to help you get better loan terms than a bank or a dealership.
Pay Cash for Extras
Before you sign on the dotted line after selecting a new car, pay for the extra fees with cash. The fees are simply adding to the loan without adding any value to the car. So, for taxes, documentation fees, and other extras, dip into your pocket to pay them.
Get a Short-term Loan
Although you will pay more per month on a car loan, try to get the shortest loan you can afford. Along with not paying as much interest, you could get a better interest rate.
Some lenders will charge higher interest rates for loans with long terms, so avoid them if possible. Calculate how much you can pay each month for a car before stepping foot onto a car lot.
Being armed with information about your financial status before going shopping for a car can help you get the best loan terms possible. You will know how much you can afford to pay each month for a vehicle, which can help you stick to a budget for the car you need.