Getting a new car can involve a lot of calculations. After all, you will have to plan your finances for the next three or more years. One of the major considerations is whether you should get an auto loan. Car loans are pretty easy to get, as compared to home loans, and you can get more flexibility for your purchase. For example, if you wanted to buy a small car, a loan may allow you to get a sedan. Also, if paid on time, car loans can help people in improving their credit score and can be a good way to balance the overall cost.
If you look around, you will find a lot of auto loan lenders, and most of known banks and authorized lenders often welcome customers to get a loan. As a consumer, you have to look beyond the advertisements and choose the right option. To make things simple, we have sorted important tips that you need to know.
See what you can afford
Most people don’t bother about the overall impact of a car loan. The overall cost of the loan isn’t dependent on the monthly installment, but more on the interest rate. Even a small difference in the APR can mean big expenses, and you may end up paying a lot more. The ideal step is to decide the car that matches you budget. Unlike homes, cars aren’t used forever, and therefore, if you cannot afford a big car or don’t intend to use the same vehicle for more than five years, you shouldn’t buy an expensive one. Once you have decided on the model, look for the annual rate before anything else.
Long or short term?
Car loans are usually taken for smaller terms, such as three or five years. Smaller term means bigger monthly installments, but it also ensures that the interest rate is lower. Long term loans over seven years can be a dent on your pocket for a long time, and if the interest rate isn’t good enough, you may end have having negative equity on your purchase. Make sure that you don’t pick a term more than five years.
Bad credit loans
It is possible to get auto loans with a bad credit score, simply because such loans are for a smaller time and amount. However, one must have a minimum stable income, as stated by the lender to avail such loans. Typically, bad credit loans are more expensive, but if you compare rightly, you can get a better deal. Don’t look for agents who are sorting deals for customers. Instead, you can check with online auto loan lenders, who can help in finding whether you qualify for the application in the first place. You can learn more at New Car Canada about getting a loan approved.
Lastly, try to make the down payment of your car, so that you are in a better place with regards to the principal debt. For the rest, an online search is more than enough!