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Nowadays, an increasing number of US residents are struggling to pay their monthly installments on car loans. While the numbers are small, they are growing at a rapid pace. However, loan applicants are facing a lot of problems as far as making monthly payments is concerned. This has been happening more since the Great Recession.
As a car buyer, you want to be sure that you can afford the loan. The car should be such that you can easily afford it, and it should also fit your budget. This will keep you out of trouble in most cases. If you want to get the best deal, we suggest you follow the 5 tips below.
1. Check Your Credit Report
First, you should get your credit reports from three agencies: TransUnion, Equifax, and Experian. Actually, you should check all three of them because you have no idea which one your desired lender is going to use. Also, this will give you enough time to correct your mistakes.
Also, you should check your credit rating as your credit rating will be used to determine the interest rate. If you have a good credit rating, you will be able to get the loan at a much lower rate of interest and vice versa.
2. Shop Around
We suggest you shop around when you’re looking for the best deal. Similarly, you should look for the best deal as far as applying for the loan is concerned. Most people don’t do this. Most of them don’t do their homework before going to the dealer.
According to the Center for Responsible Lending, 80% of car buyers make their financing decisions at the dealership. Perhaps it is the convenience or allure of advertisements offering low interest rates. Keep in mind that you can get the lowest interest rate only if you have a great credit score.
If you want to get started, we suggest that you contact community banks and credit unions. Generally, they offer the lowest interest rates on car loans.
3. Smallest Loan
Since the prices of cars have gone up, car loans are being offered at higher interest rates so that the total amount of the car can be paid in minimum monthly instalments. So, nowadays, you can finance your car for up to 9 years. The monthly payment will reduce with the increase in the number of installments.
Here’s the catch: If you choose the higher rate of interest and you decide to pay for 5 years, you’ll end up paying more for the car over the long term than if you had chosen a shorter payment term. Hence, you should choose a shorter repayment tenure as it will help you get out of debt faster.
4. Monthly Payment
Some people assume that as long as they can make the monthly payments, they will keep going, but this is not a good assumption. In fact, this is a grave mistake.
So, before you apply for a car loan, make sure you keep these 4 factors in mind.
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