So you’re in the market for a new or used car, but you don’t have the money to pay for it upfront? Don’t worry; you’re not alone. A lot of people turn to auto loans to finance their vehicle purchases. However, before you go ahead and apply for an auto loan, there are a few things you need to know. Here are our top five tips for getting the best auto loan deal possible.
Get a Recourse Loan
A recourse loan allows the lender to take back the collateral (in this case, your car) if you default on the loan. While this may seem like a bad deal for borrowers, it protects you if you can’t make your payments. If you default on a non-recourse loan, the lender can’t do anything except sue you for the money you owe.
When taking a recourse loan, you should make sure that you can afford the monthly payments and that you’re comfortable with the idea of the lender taking back your car if you can’t make the payments.
Strive to Have the Shortest Term Possible
The shortest possible term means you’ll have the loan for a shorter period and pay less in interest. Even a difference of a few months can save you hundreds, so try to get the shortest-term auto loan that you’re comfortable with.
To easily achieve this, you can make a larger down payment. This will lower the amount you need to finance and, therefore, the term of your loan.
Make Sure Your Credit Is Top-notch
Your credit score is one of the most important factors in getting a good auto loan deal. The higher your credit score, the lower the interest rate you’ll be offered. You may not even qualify for an auto loan if you have a poor credit score. So before you start shopping for a car, make sure you check your credit score and take steps to improve it if necessary.
Put as Much Money Down as Possible
When it comes to auto loans, the more money you put down, the better. A larger down payment means you’ll need to finance a smaller amount, which will in turn lower your monthly payments and the overall cost of the loan. Try to put down at least 20% of the car’s purchase price if you can.
Refinance to Save Money
If you have an auto loan with a high-interest rate, you may be able to save money by refinancing. Refinancing means taking out a new loan to pay off your old one. When refinancing, aim for a lower interest rate and a shorter loan term. You may also be able to save money by switching from an adjustable-rate loan to a fixed-rate loan.
Before you refinance, make sure you understand all the fees involved and compare multiple offers to make sure you’re getting the best deal possible.
These are our top five tips for getting a great auto loan deal. If you follow these tips, you’ll be well on your way to finding an affordable loan that meets your needs.