Your ability to get a payment you can afford determines whether you're able to buy a new automobile. The interest rate on the vehicle loan impacts the car payment, so getting a low payment involves acquiring a low rate. Several factors can help you get the best rate possible on your next auto loan.
Credit Risk
A bad credit history or low credit score means you're more likely to default on an automobile loan. While this may not stop you from getting a vehicle loan, low credit scores and higher interest rates go hand-in-hand. Getting a lower rate and a low car payment requires reducing your credit risk and improving your credit score. Timely debt payments and reducing debt can help bring up your FICO rating.
Down Payments
Down payments help bring down car payments in two ways. First, a down payment of 10 to 20 percent reduces the auto loan balance. Second, a down payment helps you negotiate a lower interest rate on the loan. If buying a car for $20,000, consider a 20 percent down payment of $4,000.
Shopping Around
Dealerships aren't the only potential providers of financing for your new vehicle loan. You have several options, including getting a loan from your bank or credit union. Dealerships are the middleman, and they often pad or increase interest rates to make money. Going directly to the bank can result in a cheaper rate and lower car payments.
Vehicle Loan Term
Financing a car for two or three years helps you pay off the vehicle more quickly. Unfortunately, a short finance term also increases the monthly payment. If you're interested in keeping payments low and affordable, negotiate a longer vehicle term. Five-year terms are typical, but some finance companies eagerly extend vehicle loans to six or seven years. Bear in mind that you'll pay more interest with a longer-loan term, which increases the total cost of the car.
0 comments:
Post a Comment