If you are someone who drives a lot and you have been holding on to your car for quite a long time, inconveniences might happen. While mild repairs or breakdowns are common occurrences, older cars tend to require bigger and more expensive repairs. Let’s say, you have a growing family; another thing to consider is their safety. If you want to spare yourself from all the hassle, maybe it is time for that upgrade and invest in a new car.
With the prices today, buying is not that simple. Unless you have enough savings to purchase a car and pay in full, you may want to explore one of these two types: one is leasing a car where you pay for it during the leasing period and turn it in once it’s over. The other one is to apply for an auto loan where you make payments for the car you purchased on a monthly basis. If you are leaning towards applying for an auto loan, here are some important things an auto buyer should know first before applying.
What You Can Only Afford
Setting a budget is important to make sure you don’t bite off more than you can chew. Loans take a long time to finish and you will never know what could happen in the future. Setting a budget means making realistic plans that won’t end up as a burden to you later on. This should be done even before you look at cars you like or a lender.
Your Credit Score
A credit score dictates your eligibility to be approved for an auto loan. Lenders determine your creditworthiness with the use of your credit scores. The key here is, the better your credit scores are the bigger chances of you getting your loan approved. Interest rates are also typically computed based on your credit scores, so you will most likely have a lower monthly payment waiting for you once approved. The U.S law entitles you to a free annual credit report, which means the information is very much available.
Common Loan terms
There are four common loan terms that you need to understand. There’s the down payment, monthly payment, loan term, and APR or annual percentage rate. A down payment is typically the payment you will make upfront, and the bigger the down payment you make the less you will pay monthly. The recommended percentage is at least 20% of the total purchase price.
Monthly payments are what you make regularly for the number of years specified in the contract. It’s important to maintain that your monthly payments are not more than your monthly salary to keep you from getting bigger problems in the next few years.
The loan term is the period of time that you will repay your loan. It can be a short-term loan (36 or 48 months) or a long-term one (72 or 84 months). Generally, a short-term loan has a lower interest rate and loan cost.
APR or the Annual Percentage Rate is the interest rate you will pay on the loan yearly. If you have a lower APR, that means that your interest costs are lower as well.
Length of Your Loan
As we have previously mentioned, your loan repayments will go on for a long time so it is a very important thing to consider. Low monthly payments may seem easier for you but can you imagine if these payments will be made for the next 10 years? Make sure that you carefully think about the length of your loan.
Get Pre-Approved First
It’s a smarter move to shop for a car after completing the pre-approval process and when there’s already a sure offer from a bank or lender to finance your purchase. If you already have that pre-approved loan, you can use it to your advantage by negotiating for a better deal because you are pretty much considered a cash buyer.
You have the power to make things run as smoothly as you wish just as long as you know how to do your preparation and research. Once you make that purchase, you are stuck with it for a long time so might as well make sure to get a great deal on your car loan.
How Greater Alliance Federal Credit Union can help
If you’re deciding whether to lease vs. buy a car, we recommend you do research to determine what is right for your situation and budget. Whether you’re looking to finance a new or used vehicle, we offer vehicle financing solutions to fit your needs. Our auto loans include:
- Competitive rates as low as 2.99% APR for new auto loans and 3.24% APR for used auto loans.
- Fast approval process
- Flexible terms up to 60 months
- Up to 100% financing available, including sales tax and extended warranty
- No down payment may be required
- Easy repayment process with payroll deduction and automatic payment options
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Get the financing tools and support you need
Greater Alliance makes financing your next vehicle easy and affordable. As your one-stop solution for auto loans, our Auto Loan Calculator helps you determine a budget, and our Auto Buying Center guides you through the application process. Plus, all members receive free unlimited CARFAX reports to give you peace-of-mind.