Car Loan Tips for A First Time Car Buyer

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So you’re planning to purchase a car,but are you prepared?  Next to a home, a car is a large investment and you can’t afford to make a poor decision which can have serious effect on your finances.  In this article, let’s go over a few tips especially for a first-time car buyer:

Know your personal budget.  Deciding on the type of car and the loan package that fits you will depend on your financial capability.  Aside from the price of the car, you should not forget to take into account other costs such as insurance, taxes, and maintenance expenses.  Don’t forget to consider your budget and personal income before making your choices.  More than anything else, see to it that you can afford to submit your monthly car loan payments on time.

Check out all possible loan options.  Banks, lending companies, credit unions – these are all possible resources when in search of car financing.  You should be willing to spend time evaluating your options to make sure that you will find a reasonable deal.  The bottom line is that you should never walk into a car dealership without financing in place. Sometimes the dealership may have some great deals running, but these deals are usually for people with great credit and a strong credit history. If you don’t have this, you may THINK the salesman is getting you a low interest loan but in all actuality end up getting a high interest loan. And a lot of unnecessary credit inquires that can drive your score down.

Know your strengths and weaknesses.  Recognizing your strengths and weaknesses is important before negotiating with a potential car loan provider.  Car loan rates, terms and conditions may vary from one lender to another.  Furthermore, loan providers may consider a number of factors such as the borrower’s income, age, credit score, driving history, etc.

If you have an excellent credit history and rating, then you are most likely to get the best car loan offers from lenders.  On the contrary, having a poor credit score or a lack of credit history can be a major drawback.

Students and new car drivers might find also find it a challenge to get approved for a low-rate loan since many lenders make decisions based on income stability and comparable credit (meaning they are looking to see how you have handled a large line of credit in the past ). However, there are some dealerships that will run back to school “specials”. They are targeting college students and have some good programs available. If you’re an honor student or included in the dean’s list, you might be able to ask for a lower interest rate as an exemplary academic standing is usually regarded as a sign of maturity and dependability.

Watch out for car loan scams.  As with other industries, car loan scams are prevalent in the market.  You might come across car dealerships that offer quick loans and guaranteed bad credit car financing.  It might be tempting to sign up the contract right away especially when the dealer gives enticing promises. People with bad credit who cannot qualify for a regular car loan should be particularly cautious about bad credit loan offers.

However, a lot of consumers have fallen for these tactics and found themselves stuck in an expensive car loan because the dealer was obviously after one thing – to make money at their expense.  When visiting a car dealer’s, don’t sign anything at their location.  Go home, do more research, evaluate the deal, check the company’s reputation, before making a decision.

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