Most car owners spend days negotiating the right price for a used car but don?t bother when choosing the best auto loan. If you don?t have a good financing plan in place when buying a used car, you may have to accept whatever the dealer offers. This means a loan at a higher interest rate.
Know Your Credit Score
Before you go to a dealer or other lending institutions for loans, you need to know your credit score. If you have a good credit score, you can get better deals on car loans. If your credit score is average or low, it is best to get financing quotes before you approach a dealer. Pre-arranged financing can serve as a bargaining chip with the dealer.
Getting Pre-Approved Loans
It is always advisable to shop around for a car loan before you strike a deal on the used car. This enables you to compare the different interest rates on offer. Depending on your credit score, you can bargain the interest rates and other costs.
When you get a pre-approved loan, you will have enough money to finance your purchase of a used car. Before you apply for a pre-approved loan, it is advisable to gain knowledge about the price of the car you intend to buy.
Term of the Loan
Keep the term of the loan as short as possible. Shorter term loans have higher monthly payments but low interest rates. The longer you take to pay your car loan, the more interest you pay. Most banks and financial institutions charge higher interest rates for long term loans.
Pay for extras such as documentation, registration fees, warranties, sales tax and other miscellaneous expenses using cash. Adding these additional expenses to the car loan will increase it and you may end up paying extra.