Top 4 Considerations When Shopping For An Auto Loan
Whether you're looking to buy a new or used car, there's a good chance you'll want to take out an auto loan to make affording your vehicle easier. Banks, private lenders, and even dealerships offer auto loans to help you finance some or even all of your next car purchase. Before you start submitting auto loan applications, however, there are a few important considerations worth keeping in mind that will ultimately help you choose the right loan option.
How much money are you able to set aside for a down payment on your new car? The larger the down payment, the less you'll need to finance. As a result, you may have an easier time getting approved for your loan—even if your credit history isn't perfect. With a higher down payment, your monthly loan payments will also be smaller and you may be able to pay your car off sooner. Of course, there are also loan options available for those with zero down payment.
The length of your repayment term should also be taken into consideration. The longer your repayment term is, the lower your monthly payments will be. However, you'll also end up paying more in interest over time with a longer repayment term. A short repayment term will result in higher monthly payments, but you'll save money on interest in the long run and have your car paid off sooner.
Speaking of interest, be sure to shop around for auto loan interest rates. These can fluctuate greatly based on the current financial market, as well as the type of auto loan you're applying for. For instance, dealership auto loans tend to have higher interest rates in exchange for more relaxed credit requirements. For the lowest rates, check out local banks and credit unions. Specific car manufacturers sometimes offer their own special financing options as well.
If you know you have less-than-ideal credit, you may have a harder time getting approved for certain types of auto loans with strict eligibility requirements. Instead, you may want to explore dealership "buy-here-pay-here" loans or private auto loans. Sometimes, you can even get approved for these with no credit check at all.
With so many auto loan options available, it can be difficult narrowing down which is best for you. By keeping these considerations in mind, though, you'll be well on your way to a great auto loan.