While obtaining a car loan can take some time and preparation, it can be a process that can be easily undertaken by just about anybody. In this step-by-step guide we are going to break down just how easy it is to get a car loan.
The first thing that you need to do before you look for a car loan is to choose a vehicle and negotiate a price with the seller. Haggle with the seller to get the best deal and find out how much the car is going to cost with the licensing fees included. While most dealerships offer financing for their customers, it is usually overpriced and isn’t the best deal. If you can’t get financing from any other place you can usually obtain a loan through the dealership, but I would leave it as a last resort option.
If you are trading in your old car on a new one, now is the time to find out what it’s worth. Get a copy of the Kelly Blue Book and find out the approximate value of what your old vehicle is worth. After you have made this calculation, you can find out if the dealer is going to give you fair market value for your trade-in. If the dealer doesn’t, you may have to do a little bit of shopping around. Some dealerships will try to undercut the value of your trade-in and some will give you a little bit over what it is worth. It all depends on how anxious the dealership is for your business.
Step Three: Determine Your Down Payment
This is an important step that shouldn’t be overlooked. When creditors give a car loan they usually expect twenty percent of the value of the car to be placed as a down payment. This down payment can be all in cash, all in trade, or a combination of the two. The larger your down payment, the lower you can can expect to pay for the loan.
Step Four: Shop Around and Calculate Your Interest Rate
Once again it’s time to do a little bit of homework to find the best financing rates that you can. In order to get the best deal it is absolutely necessary to understand how car loans are calculated. Below I have listed some of the basic terms that you are going to run across while trying to secure a car loan.
A, Term – The term is how long it will take to repay the loan. Most car loans use a term of twenty-four to sixty months, so you usually have a bit of flexibility. One thing to keep in mind however, is that the longer the term of the loan the more you will pay in interest.
B. Interest rate – The interest rate is the percentage of the loan that you will be charged for taking out the loan. The interest rate is usually determined by the strength of your credit rating. The better your credit, the lower the interest rate will be.
C. Annual Percentage Rate – The annual percentage rate (known as the APR) shows you exactly what you are going to be paying for the loan over the course of a year. The APR is the best indicator of what lender has the best deal and should be your main criteria for choosing a lender.
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