It’s exciting getting a new car; few things can compare to the novelty of such a purchase. However, auto financing may feel complex and intimidating if you’re a first-time buyer. Like a bad credit loan, car loans help you finance a new vehicle when you can’t afford to pay it outright. If you’re planning to purchase a car with a loan, here are three important factors to consider before applying to get a quality deal.
Understanding Car Loan Basics
Car loans allow you to borrow a specified amount from your car dealer or banking institution at a predetermined interest rate. Once the terms are agreed upon, a time limit is allotted for repayment. You then repay the settled-on loan amount weekly, bi-weekly or even monthly, based on the terms in your agreement.
Moreover, per your contract, you agree to pay interest on the loan principal. It’s a simple process; however, a few crucial factors must be remembered before applying.
1. Compare Rates
Car loan terms and interest rates fluctuate between dealerships. As such, additional research goes a long way in determining the best deals in your area. Here are a couple of things to keep in mind:
- The amount of loan: Many lenders retain minimum and maximum loan amounts.
- Interest rates: Look around for the best and lowest rates.
- Term of loan: Loan terms can range from 36 to 96 months. Your payments and the total loan sum you repay depend on the terms of your loan. Minimum (or lowest) payments extended over prolonged periods may cost more over time. For this reason, think about the overall loan value you’ll repay when reviewing your loan term.
2. Review Your Credit Report
Your credit report details your present credit situation. This report includes information such as your debt amount and credit history length. These details (in addition to many others) will dictate your credit score. A 3-digit number ranging between 300 and 850 (the higher, the better), your credit score helps lenders determine how “trustworthy” you are and influences their decision-making process.
3. Pre-qualify for a Car Loan
Getting an estimate before you begin looking for a vehicle is ideal. Pre-qualification is typically fast and simple; you must provide your lender with the following information:
- Debts
- Income
- Monthly expenses
- Employer
- Pay stubs from the previous month
- Identity
- Residency
Based on the provided information, your lender will assess what they’re willing to lend you for your purchase of the vehicle. And remember, pre-qualification isn’t a guaranteed approval for a car loan. However, it can be helpful for budgeting and minimizing potential disappointments.
Final Thoughts
Financing is an excellent method for obtaining a new vehicle. However, you must act responsibly to ensure your loan alleviates your financial burdens instead of worsening them. At Mr. GOODLoans, we are here to meet your car loan and bad credit financing needs. And with low interest rates and flexible payment options, you’ll find what you need with the most competitive terms. So contact our specialists today to apply for a loan.
