Finance Globe
5 Questions to Answer Before Applying for a Car Loan
As you shop for a new or used vehicle, you will always come back to one very important question: how much can I afford?
The answer to this question depends on many factors, including whether or not you will finance or pay with cash.
If you have plans to apply for a car loan, don’t jump the gun. Instead, you should first address these five questions:
1. What are you looking for in a lender?
From reputation to terms and conditions to payment options, you need to know what each lender brings to the table. There are hundreds to consider, so make sure you keep an open mind.
2. Will you search for your own car loan or rely on the dealer’s finance department?
There is nothing wrong with letting the dealer help you secure financing, but you must be confident that they have your best interests in mind.
To protect yourself, contact several lenders before you visit the dealership. This will give you a better idea of what is available, including what a competitive interest rate looks like.
3. Do you have a down payment?
Some people put money down when buying a car. Others, however, don’t see the point in doing so. You are not required to have a cash down payment, but this is something to consider before applying for a car loan. The benefit is obvious: less money financed, meaning a lower monthly payment.
4. Are you ready to take on the monthly payment?
Don’t get so excited about buying a car that you overlook how this will impact your finances. Once you sign on the dotted line, you are responsible for making a monthly payment until the balance of the loan is gone.
5. Are you searching for a specific term at a particular rate?
You may be interested in the longest possible term, which is typically 72 months. Or maybe you understand the benefits of a shorter term, such as 12 or 24 months. At the same time, you definitely realize that the lower the rate the better off you will be. With these types of details in mind, you need to search for the lender that can offer the right term and rate for your loan.
Answer these questions if the time has come to apply for a car loan.
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Comments 1
One important thing to note on obtaining financing from the dealer. They will focus entirely on your monthly payment dollar amount. A dealer will be able to manipulate your monthly payment by deferring the length of your loan. You need to consider all aspects of the loan (interest rate, loan amount, and term) to make sure you are getting a “market” loan based on your credit score and income level. It is very important to do a ton of research before walking in there to buy a car if you are planning on using dealer financing. Sometimes dealers can offer very good rates, but you want to make sure you have the adequate information to have a knowledgeable conversation about financing.
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