Is it your first time financing a car? Well, here we have gathered some sensible advice for you.
- Acquaint yourself with all credit options. Firs time car buyers usually have little to no credit history. This clearly implies that you will definitely not get the lowest rates that are advertised by the dealerships. If you want a better interest rate, then you should take some extra time to build your credit score before buying a car. Also, it’s advisable to make finance companies compete for your business. Look at the sample rates online. Then, you can use online websites for getting actual quotes; see who can beat the lowest rate.
- Shorter loan term is better. Making your loan tenure longer will make your monthly payments smaller, but you will end up spending lakh of rupees in interest. Moreover, you can also get stuck in paying for a car that’s worth less than what you owe on it. That’s why you should try to keep your loan term short –the upper cap should be 60 months, prefer even less months. You will be saving money in the long run. If the monthly payments too much, then go for a less expensive car.
- Have a budget.To figure out what you can afford, start working backward from your desired monthly payment, and then calculate the total car price. In case you are going for a used car then add some extra money to your budget. This is because used cars may have maintenance needs, and no warranty left. You want to be covered.
- Put at least 20% down payment. There are many benefits of putting more money as down payment at purchase. First, less interest on the loan. Second, you will have lesser monthly payments. Third, it makes qualifying for financing easier as the lender will see lesser risk. You will offset depreciation on the vehicle, which becomes more important with used cars. Moreover, in case your car gets involved in an accident, you will owe less to repay. To save even more money, pay off all the taxes at the time of purchase rather than including them in your monthly payments, as you will not have to pay interest on them.
- Find someone to co-sign your loan. Finding it difficult to get a financer for your loan? Having a co-sign on your loan can make it easier. Lenders find it less risky to lend money to a loan with a guarantor. Remember, that the person who co-signs agrees to pay off the loan in case you cannot. He/she will be hooked for payments if you default on your repayments.
Following these steps to buy your first car will make it easier for you to get on your shiny new wheels.