Car Financing Tips 101

 

Car Financing

 

Buying a new car is a big decision, and one that takes research, planning, and preparation. Once you decide on a budget, a car, and a dealership, you still have to figure out exactly how you’ll pay for your new ride. Here, we’ll go over the basics when it comes to financing a new car.

 

Car Financing Tips 101

 

Find a lender. First thing’s first. If you’re going to finance your new car, you’ll need to find someone willing to lend you the funds for a competitive rate. Banks, credit unions, private lenders, and the dealership itself will all offer car loans. Compare interest rates, and find a good fit for your needs and budget. We recommend getting pre-approved, as it shows the dealership that you mean business.

 

Interest Rates. Each lender will advertise their best rates, but in reality you may qualify for something different. Once you apply for a loan, the lender will take into account your credit, the price and type of car, where you live, and a number of other factors to determine your rate.

 

Terms. Typically, lenders offer car loans in 36-, 48-, 60- or 72-month periods. Short-term loans generally offer better interest rates, but require higher monthly car payments. Keep in mind that if you can afford the higher monthly payment, you’ll save money in the long run, thanks to less interest being paid over the life of the loan. On the other hand, longer-term loans allow borrowers to spread their payments out over more time, but often come with higher interest rates.

 

Down Payment. Most car dealers will require buyers to pay a down payment on a car purchase, though they don’t often specify exactly how much. Putting more cash down reduces your monthly payment, while putting less down increases it.

 

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