5 Tips to Securing the Optimal Car Loan

Owning a car is often a necessary expense.  A car can easily cost $20,000 or more.  After buying a house, it’s easily the second largest purchase for most people.

A car is a depreciating expense.  Financially, it’s always the best idea to pay full cash for a car, but most people don’t have that kind of money on hand.  It’s far more common to finance the purchase of a new automobile.  Do you need a personal car loan?

The good news is that you usually have a little time to prepare and research before you buy a car.  If your current car is getting a bit long in the tooth or you’re planning a move that will require more commuting, then you know it’s time to start planning for a new car purchase.

Here are a few tips to helping you get the best car loan:

  • Know Your Credit:  First off, you need to know your credit score.  Before shopping for a loan, research your credit score, so that you know where you rate.  Having a good credit score will result in better terms on your car loan.
  • Figure out what you can afford:  Now’s a good time to sit down and take a hard look at your budget.  What can you actually afford to pay on a monthly basis.  Usually, you can get a loan approved for up to 20% of your take home pay.  However, you want to look at your monthly expenses and figure out what you can actually afford.  Don’t bite off more than you can chew.
  • Get Your Loan in Advance:  It’s not uncommon to go car shopping and then end up talking to the finance person at the car dealership.  Quite often, these people are all at the same location to streamline the sales of the car, but it puts you in a blind situation.  You haven’t had a chance to comparison shop other loans and do your research.  If you belong to a credit union, they often have good rates for their loans.  Or you can even talk to your bank and shop for their best loan terms.  Then you can go into the car dealership armed with some knowledge.
  • Get it in writing.  Many dealerships and banks advertise great rates, however, they limit these offers to people with high credit ratings.  They may say you are “preapproved,” but there’s still a chance that you won’t get the advertised rate.
  • Get as short a term as possible:  This is good advice for all kinds of loans.  IT’s tempting to go with a lower monthly payment by getting a longer term, however remember that you are paying more interest for longer loans.

These are just a few tips to finding the right car loan.  Make sure you do your research and get the best loan possible for your needs.

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