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Getting the Right Auto Loan |  |
Having a good, dependable mode of transportation is important to everyone. While a lot of people have access to a nice public transit system, the majority of people have to rely on a vehicle to get them where ever they need to go in life. When you are looking for the right vehicle for your needs, you want to make sure that you are considering and looking for the right auto loan.
When considering what kind of auto loan you are going to get, the first thing you want to think about is how much money is in your monthly budget for a car payment. The overall price of the car is important, but realistically the breakdown of how much you can spend each month is going to take precedence. Let’s say that you want to find a vehicle that will cost you about $200 a month. Considering the national average for a 5 year car loan is 7.5%, you don’t want to look at cars that cost more than $10,000 if you want to stay in that $200 a month range.
Now, that estimate of $200 a month based on interest rates and the amount of the car is just that; a rough estimate. Those numbers are with no money offered as a down payment. If you still wanted to stay in that monthly price range of $200, but you had $2000 saved up that you could put down as a down payment, well then you could look at vehicles with a $12,000 price range. That would open up a few more choices for you.
Regardless of if you want a $10,000 car or a $40,000 car, if you have a down payment, then you will have a lower monthly payment. However, having a down payment doesn’t have to be just about lowering your monthly car payment. Whether or not you put money down on a car can effect whether you are approved for your auto loan or not, and if you are approved might even effect your interest rate.
One more factor that you want to think about when figuring out how much you want spend, is figuring out how long you want to pay for your car. While some used car lots mandate a 3 or 4 year loan, most of the new car lots offer the traditional 5 year loan or they even offer a 6 year loan. Granted, if you opt for a longer loan, you will eventually pay more for your car over the course of the loan due to interest. But that is something that most people are willing to deal with, since spreading out the payments an additional 12 months will make the monthly payment more affordable.
Once you have a monthly payment price range in mind, you will want to decide which bank or finance company you want to go through for your auto loan. Many people have better luck going through their own personal bank to secure their loan. Having an account in good standing with your bank will definitely improve your chances of getting a loan with them. Credit unions are also great financial institutions in which to consider applying for an auto loan.
If you don’t have a bank account anywhere, or if you don’t have the best credit, you can also try to find a car dealership that does their own on-site financing. Generally, the “buy here, pay here” lots don’t make decisions based on credit scores or credit standings. The on-site financing is usually done on used cars and for a shorter loan length, like 12 or 24 months.