Buying a car requires big amount of money. For most cases you need to get extra money to buy your first car or change it for a newer one. And if you want to do this you need to know how to finance a car and get a car loan.
Car loan basics
Car loans are in fact the same credits you’re applying to buy something. You borrow the money and pay it back to lender every month with interest. The only difference is while payment period (or car loan term) the car technically owned by lender, but you are fully responsible for it. In case you don’t make any payments for the car, the lender simply taking it over. After all payments, when the loan term is over, the car is fully yours.
Car loan term
Car loan term is the period of time when you have to paying off your debt plus interest rate. Remember the more loan term lasting, the less monthly payment, but higher interest rate. So have in mind this while applying for car loan.
Credit score means much
The less debt you have, the more credit you are successfully paid off – the better credit score, lower interest rate and less chances of getting rejection. Credit score of 720 or above is optimal for car loan approval. And it is better to pay off all old bills.
Filling loan application
While fill out loan application you have to submit your social security number, employment and income information, monthly expenses and outstanding debts. And if you fill out a lot of loan application, or planning to do it, it’s better to submit it at the same time – otherwise your credit score may be lowered.
It’s better to keep in mind that car loan frequently is not only the money you have to pay off and additional interest. Sometimes it is also additional fees, including insurance, for instance. The other thing you have to remember – some loans has prepayment penalty, so if you want to pay off the loan early, you may charge additional fee.
One more thing
Car dealerships not always bring the best car loan rates, so it is better to bring pre-approved car loan from your financial institution. If the dealership beat the loan terms you’ve already been pre-approved for, you can take the dealer’s offer. If not, you already have financing.
Car loan rejection
If you get a rejection it means that either you can’t afford the car right now or you have low credit score. In case of first scenario you may choose a more affordable car or review your annual expenses. If you have low credit score, you have to wait or paid off every debt possible to increase your rating.
To calculate car loan you may you Car Loan Calculator on our website.