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3 Things You Should Know Before Getting A Car Loan
These days, most Americans find it hard to finance their car purchases. Potential customers will often try hard to get a good price on their desired automobile, without thinking about what kind of loan they’re getting. As most consumers are looking to get a good deal quick, they fail to think about the financing details. To help out, here is a list of things to check before you decide.
Reviewing your credit score
It is very important to determine your credit score before applying for credit. The interest rates that are offered will to some extent depend on your credit score. You can try to better your score by paying your bills on time, checking if your account is linked to a person with a low score (i.e. spouse or family member), and try to eliminate any outstanding debt before you start applying for new credit. Remember, the better your score, the less you pay in interest.
Getting the most affordable car loan out there
Statistics show that 8 out of 10 vehicle buyers in the United States do their financing at the dealership which is one of the common mistakes that face potential buyers. It is highly recommended to collect several loan options before deciding on one and determine the amount of money you will need to put down the price of the vehicle (down payment). If you can afford it, it will lower the amount you need to borrow, which is useful since it will lower the final amount of interest you will need to pay. Another thing to look out for when comparing is the annual percentage rate that shows the total cost of financing your car annually including fees and interest built up to the day of your first payment. APRs are great for comparing loan offers from various lenders because they show you the total cost of financing.
Choosing the best loan duration
Car prices have only been going up, and with that, loans are getting longer in duration. The popular option at the moment goes from seven to even nine years. The tricky part is that the longer your loan is, the higher your ultimate cost will be. Some people find the idea of smaller monthly payments to be appealing, but ultimately, shorter loans are always recommended since the period of debt will be quicker to get out of. It is advised you check other obligations you might have in addition to the car loan, such as mortgage or credit cards. Long-term car loans will lengthen the time before you can begin building car equity. In other words, if you decide to change your car sell it sooner, the price you'll get for it probably will not cover the owed amount.