5 Things You Should Know About Financing Your Car

Your Credit Score Matters

Financial institutions will look at your credit score to determine your creditworthiness. Before you apply for a loan and get rejected because of your bad credit score, make sure you know your score. You should get a free annual credit score report.

Once you have established your score, you can get advice on how to improve it if it is less than perfect.

Get Preapproved First

If you are able to get a preapproval first, then you should go ahead and get one. This will make the negotiation process with your dealership easier. You will find that the cost of your car goes down with a preapproval. This is because getting preapproved is the same as having cash on hand.

If a dealer is offering a discount or rebate, then you can only qualify in most cases if you have a preapproval.

Shop Around

Choosing the right car is important, but choosing the right lender to finance your purchase is equally as important. There are different finance options you could consider including your car dealership, a bank or a financial institution that is not regulated.

There are also plenty of online lenders with less strict requirements than banks. The downside is that such lenders will usually charge higher interest rates.

Some other factors to consider include requirements of each of these lenders and their repayments schedules. Try to go with a payment schedule that repays the loan in the shortest amount of time if it fits within your budget.

The Car Belongs to Your Lender Until You Finish All Repayments

When you are financed by a bank or any other lender, they maintain ownership of your car and will not give you the car’s title until you have finished making payments for the car. If you fail to make a payment, then they have the right to repossess the car and sell it off to get their money back.

Stay Within Budget

Because you are getting your car financed, it is easy to go overboard and buy a car that does not fit your budget. You should conduct an analysis of your budget and see how much money you have left over after paying your rent, bills, and any other loan repayments you may have.

If you do not do this, then you might buy a car but squeeze yourself such that you have no disposable income left to pay basic bills or even save.

Once you have made all these considerations, then you are ready to go to your car dealership for a test drive.

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