Car financing is a crucial step in getting you that sweet ride you’ve always been itching to buy. If not done right, you’re going to lose a ton of money, and you’ll be swimming in debt in no time. Financing a car can be broken into three essential parts. You need to understand these essential parts, so you don’t get ripped off as a consumer. Know all the values that fall within these three parts. These will determine what you can and can’t afford as a monthly car payment.
The amount to be borrowed
This part will cover your entire car purchase plus the additional fees and taxes. If you have any money left from a previous car loan, it will still fall into this category. It’s everything that you’ll be borrowing from the bank so that you can purchase your car. The first thing that you should do is research on the market and trade-in value of the vehicle of your choice. It will help you to figure out the best deals and offers that you can get. Don’t go overboard and accept all the offers that car dealers throw at you; just focus on buying your car. You don’t need to pay full price for extended warranties, fancy accessories or carpet cleaning.
The interest rate
The interest is the amount of money that you must pay back to the bank so that you can have the loan. To get the best interest rate, you need to have at least a good credit score. Credits scores are used by financial agencies and institutions to determine whether you are qualified to be given a loan with a low-interest rate or not. In this way, the bank can make sure that you’ll be able to repay all of your monthly payments on the agreed-upon dates. The most recommendable interest rate to have is 10% or lower. Going over this means that the banks and dealerships that you sign up with will be leeching away a lot of your money. You can use online loan calculators to figure out the estimated monthly payments that you need to pay to cover the loan. Visit sites like Car Finance Giant, where you can use their online loan calculator and get the best deals and offers.
The length of the loan
The more you hold out on repaying your loan or agreeing for a loan extension, the more money you’ll be throwing away. Choose a loan offer that you can pay off in at most 60 months. Going over 60 months means that the dealership will be able to take a small bite out of your monthly salary. Plus, having a high-interest rate will leave you with a massive debt to pay off. The earlier, the better. Make a breakdown of payments, so you can carefully monitor your monthly costs.
Remember that a monthly payment will not determine what you can afford. When you apply what you learned here, then you’ll be able to make the necessary preparations before signing up for a car loan.