After buying a home, one of the most crucial investments that people look forward to making is buying a car. If you can afford to pay the full amount upfront, do it. However, not many people can’t afford to do so. In such a case, you’d need a loan. Remember that a loan accrues interest with time, and as such, you need to be prepared before you take out an auto loan. With that said, there are certain things you should do and those that you shouldn’t do before you get a car loan.
1. Apply For your Loan Within the 14 days
By checking your credit history, lenders can know your credit score. If you apply for the car loan with 14 days, the negative impact will be reduced. Most lenders don’t mention this to borrowers. This is because the shopping period of FICO scoring is two weeks, and all inquiries you make during that period will be treated as one, thus reducing its impact on your credit score.
2. Check Credit Score and Reports
Checking your credit score and reports before applying for an auto loan is crucial. Poor credit means you might pay higher rates than someone with better credit. This will make it hard for you to choose between going ahead to apply for the loan or giving yourself time to improve your credit score. In case your credit score is excellent, you can use it to negotiate and get better terms on the car loan.
3. Know your Budget
The right way to know which car loan is best for your budget is by focusing on the total cost of the vehicle. This means the final price of the car, which includes the interest and number of payments. With such figures, it will be easy to shop around as you’ll be comparing the total prices of the vehicles from one dealer to another. Having such information means you’ll be able to settle on a deal that best fits your budget. Also, searching ‘Scotia auto loan calculator‘ online can help you learn how to simplify the process of calculating the total amount you’ll have to pay for the car loan.
1. Failing to Research
We cannot stress enough about the importance of doing your research before buying a car. Begin by getting advice and more details about the type of vehicle you want. Some of the factors you need to consider are; why you want the car, how often to use it, fuel prices, repair cost, Engine CC, among others. You can go to expert auto review sites to get advice on the car you want.
2. Don’t Look for Long-Term Loans
Most people are guided by the monthly payments they’ll be making to decide whether they will accept a car loan or not. However, making lower monthly payments for a long-term loan will be more expensive compared to a short-term loan for which you are making more monthly payments. This amount could translate to thousands of USD in interest payments. The best thing to do is go for shorter-term loans if you won’t struggle to make the monthly payments.
3. Not Making Down Payment
If you can make a down payment, do it. This will only work to your benefit as it will reduce your overall interest as well as the monthly payments for your auto loan.
The truth is that it’s much more fun to shop for a car than it is shopping around for a car loan. However, both involve making vital decisions that will affect your future. Therefore, take your time to research different auto loans just as you would when looking for a car.