5 Car Loan Management Tips

So you want to buy a new or used car but don’t have the money to pay for it all at once? Don’t be concerned; you’re not alone. Many people use auto loans to finance the purchase of a vehicle. However, before you apply for an auto loan, there are a few things you should be aware of. Here are our top five suggestions for obtaining the best auto loan possible.

Obtain a Recourse Loan

If you default on the loan, the lender can repossess the collateral (in this case, your car). While this may appear to be a bad deal for borrowers, it protects you in the event that you are unable to make your payments. If you default on a non-recourse loan, the lender has no choice but to sue you for the amount owed.

When taking out a recourse loan, make sure you can afford the monthly payments and that you’re okay with the lender taking back your car if you can’t make the payments.

Strive for the shortest possible term.

The shortest term means you will have the loan for a shorter period of time and will pay less in interest. Even a few months can save you hundreds of dollars, so try to get the shortest-term auto loan that you’re comfortable with.

You can easily achieve this by making a larger down payment. This reduces the amount you need to finance and, as a result, the term of your loan.

Make certain that your credit is excellent.

One of the most important factors in obtaining a good auto loan deal is your credit score. The lower the interest rate you’ll be offered, the better your credit score. If you have bad credit, you might not even be able to get an auto loan. So, before you start looking for a car, check your credit score and, if necessary, take steps to improve it.

Put down as much money as possible.

The more money you put down on an auto loan, the better. A larger down payment means you’ll need to finance a smaller amount, lowering your monthly payments and overall loan cost. If possible, try to put down at least 20% of the car’s purchase price.

Save money by refinancing.

If you have a high-interest auto loan, you may be able to save money by refinancing. Refinancing is the process of getting a new loan to pay off your old one. Aim for a lower interest rate and a shorter loan term when refinancing. Switching from an adjustable-rate loan to a fixed-rate loan may also save you money.

Before refinancing, make sure you understand all of the fees and compare multiple offers to ensure you’re getting the best deal possible.

These are our top five tips for obtaining an excellent auto loan. If you follow these guidelines, you’ll be well on your way to obtaining an affordable loan that meets your requirements.