Financing a used car often is not as easy as getting a loan for a new car. Here are some tips to help make the task simpler.
Know Your Credit
Always check and correct your credit report and score before checking for an auto loan. Improve your credit if you have time, so you’re not charged more interest.
Get Quotes
Check with banks, credit unions, and online lenders for auto loans and compare the offers. Check the amount they’re lending, the term, and the interest rate. Get them to compete and give you the best offer.
Keep the Term Short
Try and keep the term a short as possible. You may pay a higher monthly payment, but in the long term, you’ll save a lot of money on interest, and you’ll get debt-free sooner.
Maximize Down Payment
Save and put down at least 20% of the car’s total price as a down payment. That way, you’ll borrow less and be offered a better interest rate, and save a lot of money in the long run.
Pay Fees in Cash
Don’t roll any fees and taxes into your loan. After all, why should you pay interest on fees and taxes? Pay cash for these and be done with them.
Get a Non-Recourse Loan
A non-recourse loan will protect you from repossession related to default and deficit from depreciated value because you won’t have to pay the difference and won’t have a valuable asset to cover the loss.
Time It
Research about when interest rates are the lowest before you go loan-shopping. Get quotes at different times of the year to compare as well. Look for slow months so that the dealer gives you a good deal too.
Get a Co-Signer
If this is your first loan, you may be offered a high-interest rate even if you have a stable, high-paying job. So, get a co-signer with good credit history and get a lower interest rate.
Don’t Complicate It
If the lender seems sketchy or the contract is too complicated, walk away from the discussion. Only borrow from reputed lenders.
Be on Time
Always make your payments on time. It’ll improve your credit and save you money over the long term.
