Imagine yourself walking into a restaurant. You’ve been hearing about this place for days and every single person you’ve talked to said you have to try their burger. It’s the best burger ever.
You try it.
You love it.
The bill comes out and you see that burger just cost you $300. That’s absurd, right? Why would a burger cost so much? More than that, why would you order something without looking up the price?
Consider the Costs of a Car Loan
Getting a car loan is kind of like this. You spend days, sometimes months, searching for that perfect car; a car you’re going to love for years to come. Then when you buy the car, you just take the first loan you get without looking around. Chances are, you can get a lower rate than the first loan that walks through the door.
Don’t make this kind of mistake because it can cost you thousands over the term of your car loan. Instead, see what steps you can take to avoid certain pitfalls.
Car loan rates should always be on your mind, even while you focus on trying to get the best deal on a car.
It’s More Than Just Interest
There are a few factors involved in getting a car loan. Yes, you’re going to look for a low percentage rate. Low is awesome and it helps you save money month to month.
But that’s not all of it.
Check out the loan term. Car loan terms range from 3 to 7 years on average, and even though you may extend your hand to accept the longer term, you’ll end up paying more over the life of the loan.
You should also consider putting down a larger down payment. If you put down $4,000 instead of $2,000, you’re obviously paying less over the years on principal, but you’ll also pay less in interest.
Know Your Credit Score
Know your credit history as well! This is a massive determining factor for what you will pay month to month for your car. Getting a car loan, the right car loan, will be more beneficial to you if you know your history and what to expect.
First-time car buyers may not realize the credit score and history impact. A higher score can help you have a low-interest rate. There are plenty of free sites out there to help you find out about your credit history, and you can even speak to the lender before you sign the loan.
As you shop around for a car loan online, don’t limit yourself to just one financial institution. It’s fine to check different sources.
When lenders run your credit to see what you qualify for, you’re having a soft credit inquiry. This isn’t going to destroy your credit, but try not to spend more than two weeks finding a loan. Some credit monitoring agencies use scoring models that penalize many soft inquiries over a period longer than two weeks, which can really hurt you once you finally apply for a loan.
Loans are hard inquiries and will ding you more than a soft inquiry. So, as you shop around for the right car loan rates, you’re better off knowing your credit history so you can focus on the car-buying experience—which as we all know, is terrible.
Lift Credit knows what it means to offer a loan experience that isn’t terrible. So, make sure you follow these simple tips to help you get started and get you on the road without added stress.