Things To Consider For Your First Time Auto Loan
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When you want to apply for your first auto loan, you should know what you are doing and how to get the best loan for your financial situation and lifestyle. This is not always easy as most consumers do not know what to do or look for in this financial vehicle. Without a doubt, this is a huge decision, and you must take your time and consider a host of factors and options. With this in mind, here are nine things to consider when applying for first time auto loans.
You will probably qualify:
It is a scary process to run out, get a loan and buy a car. However, most people at some point in their lives buy a car with bad credit. In the past, especially when banks were stringent with loans, some struggled to get the money needed to buy a car. Now, with times improving, you should have no trouble getting a loan, even if you have less than stellar credit. While this is true, you must know you will pay more in monthly payments if you do not have high credit score. Of course, in the future, if you make payments on time and maintain a decent credit profile, you can always refinance your loan and enjoy a low rate.
Your credit score:
Before getting started, you should know where you stand in regards to your credit score. Ideally, you should have a high one as you will get a better rate. If it is too low, you are unlikely to land any good deals on financing. Now, if it is low, you can raise it by paying off debt and resolving issues. On the other hand, if you have serious financial problems, you should consider holding off on an automobile purchase until you can fix your underlying issues. Otherwise, in the future, you are likely to lose your car.
When applying for a first time auto loan, you should have your information on hand. Think about it, when you want to get a car, the lending party will want to know about your personal and financial information. With this, you can get the best deal on your loan. To prepare for this, you should get out your pay stubs, and any other financial information that the lender deems necessary. Then, when you fill out the paperwork or speak with a specialist, you can have confidence that you will get a great rate and will not have to deal with any lengthy delays when the lender asks for more information.
How much you want:
Now, it is easy to fall in love with a $50,000 sports car. However, you should think a little more deeply about your car purchase. If you are a first time buyer and want a simple car to get to and from work, you should consider a Corolla or other simple car offering reliability and safety. With this, you will also have enough money to make your payments without struggle. Remember, there is nothing wrong with a nice and new car, but you must understand that it comes at a large cost, and you should consider keeping your first purchase simple and not over-the-top.
Length of loan:
You should think about the long-term when pondering your vehicle purchase. For example, when you want to buy a car and keep it for a decade, you can probably get a loan for six years without much aggravation or worry. On the other hand, if you want to buy another car in a few years, you should keep your loan short. Otherwise, it is easy to fall into the trap of trading in vehicles and getting a larger payment. This comes at a huge long-term cost and will likely hurt your financial future.
Of course, the monthly payment is not the most important thing as you should look at the overall price. But, the reality is, you should get a monthly payment that you can truly afford. Now, most people do not know what this means. To understand this further, you should look at your budget and come up with a plan to make your payments. At the same time, when coming up with a monthly payment you think you can afford, remember to think about intangibles of your financial life such as missing work or running into other short-term problems.
Look at the cost of ownership:
As mentioned, it is easy to only think about the monthly payment. While this is the biggest cost of car ownership, it is far from being the only thing to remember. No, you must understand that car ownership is costly. For starters, other than a monthly payment, you will have insurance, fuel, maintenance and taxes. On top of that, you may have to pay for parking and tickets. Simply put, when doing this, you can understand if you can truly afford the monthly payments. If not, you may want to tone down your purchase.
Ideally, when buying a new or used car, you should offer a sizable down payment. For starters, when you can offer this, you are likely to get a lower interest rate on your loan. Not only that, you can show the lender you are serious and have a good financial situation. Now, there is no set rule on how much you should put down. But if you can write a check for a couple of thousand dollars, you are likely to get the car you want with little effort. At the same time, while this is a good idea, you should never put yourself in a bad financial spot just to write a down payment check. You should still have an emergency fund so you can avoid using credit cards or borrowing money when a financial problem occurs.
Be wary of the dealer:
Often, a car dealer will try to get you to sign up for a loan using their own in-house dealer financing options. This is not usually prudent as most car dealerships, used and new, do not offer great rates. At the same time, some salespeople will try to pressure you to fill out a loan application. Instead, you should have a pre-approval in hand from a third-party company that provides great deals for first time buyers. When doing this, you will get the bets rate on your loan. Since most dealers would rather not lose a customer, you should tell them at the end of the negotiation process as they are likely to allow you to finance on your terms. Otherwise, if you tell them in the beginning, they are likely to try to offer a high price as a punishment for taking your own loan to the table.
If you want to buy a new or used vehicle, you should have no problem getting a loan. While it is not always a fun process, you can land the car or your dreams if you consider your options and look for a good deal on your vehicle loan. If you do not do this, you are likely to overpay or end up in financial trouble. Luckily, with the right amount of research and devotion, you will find a loan that suits your unique financial situation.
To begin the process, start your application today with Valley Auto Loans!